RJR Nabisco
| Company type | Conglomerate |
|---|---|
| Industry | Tobacco, Food products |
| Predecessor | R. J. Reynolds Tobacco Company, Nabisco Brands |
| Founded | 1985 |
| Defunct | 1999 |
| Fate | Split into R. J. Reynolds Tobacco Company and Nabisco (absorbed into Mondelēz International) |
| Headquarters | New York City , United States |
Area served | United States, International |
Key people | F. Ross Johnson (CEO from 1987), Louis V. Gerstner (CEO from 1989) |
| Products | Tobacco products, Food products (Nabisco) |
Number of employees | approx. 14,000 (retained in Winston-Salem before HQ move) |
R. J. Reynolds Nabisco, Inc., commonly known as RJR Nabisco, was an American conglomerate that integrated tobacco and food product divisions, with its headquarters located in the Calyon Building in Midtown Manhattan, New York City. The company dissolved as a unified organization in 1999; its tobacco division continued operations under R. J. Reynolds Tobacco Company, while the food segment, Nabisco, was absorbed into Mondelēz International.
History
RJR Nabisco came into existence in 1985 through the merger of R. J. Reynolds Tobacco Company and Nabisco Brands. In 1988, Kohlberg Kravis Roberts & Co. (KKR) completed what was then the largest leveraged buyout by acquiring RJR Nabisco. Due to escalating legal challenges associated with tobacco, the tobacco operations were separated in 1999, leading to the renaming of the remaining entity as Nabisco Holdings Corporation, which is currently under Mondelēz International’s ownership.
The parent entity, RJR Nabisco Holdings Corp. (NYSE: NGH), oversaw RJR Nabisco, Inc. Following the 1999 split, Nabisco Group Holdings Corp. controlled 80% of RJR Nabisco Holdings Corp., which in turn managed Nabisco, Inc.
Formation
R. J. Reynolds Tobacco Company was established in Winston-Salem, North Carolina, in 1875 and rebranded as R. J. Reynolds Industries, Inc. in 1970. On April 25, 1986, it became RJR Nabisco after acquiring Nabisco Brands Inc. through a $4.9 billion purchase combined with an earlier $1.9 billion stock exchange in 1985. Shortly thereafter, RJR Nabisco divested multiple divisions: Del Monte’s frozen foods were sold to ConAgra Foods in May 1986; soft drink brands Canada Dry and Sunkist were transferred to Cadbury Schweppes in June; the KFC franchise was sold to PepsiCo in July; and Heublein was divested to Grand Metropolitan in January 1987.
Headquarters relocation
In August 1986, the board appointed F. Ross Johnson as CEO effective January 1, 1987. Johnson aimed to enhance the company’s stature by moving its headquarters from Winston-Salem, which he considered inadequate for a "world-class company." After evaluating New York City and Dallas, RJR Nabisco chose Atlanta for its developing corporate landscape. The board approved relocating to Cobb County, Georgia in January 1987, affecting between 250 and 300 employees while retaining approximately 14,000 staff members at Winston-Salem. The company donated its expansive 519,000-square-foot World Headquarters Building to Wake Forest University, continuing to operate there until its move in September 1987. Subsequently, RJR Nabisco's Planters-Life Savers Division occupied the former headquarters facility.
KKR leveraged buyout
The leveraged buyout of RJR Nabisco became an iconic example of corporate and executive excess, famously documented in Barbarians at the Gate: The Fall of RJR Nabisco, which was later adapted into an HBO film.
At that time, Ross Johnson served as President and CEO of RJR Nabisco, while Henry Kravis was managing partner at Kohlberg Kravis Roberts & Co. The $25 billion leveraged buyout contest unfolded between October and November 1988.
Initially, RJR’s management team alongside Shearson Lehman Hutton proposed taking the company private at $75 per share. This announcement ignited fierce competition among leading private equity firms and Wall Street investment banks such as Morgan Stanley, Goldman Sachs, Salomon Brothers, First Boston, Wasserstein Perella & Co., Forstmann Little, and Merrill Lynch. The bidding war featured last-minute offers amid incomplete data.
KKR initiated a $90 per share tender offer without management consent. In retaliation, RJR's management together with Shearson Lehman Hutton and Salomon Brothers countered with a $112 per share bid intending to outpace Kravis. Ultimately, KKR’s $109 per share offer was accepted by the board due to its certainty of terms—unlike management’s proposal which lacked a "reset" provision that could reduce the final price. Additionally, concerns arose regarding Johnson’s unprecedented golden parachute arrangement.
The board opted for KKR’s bid; some analysts suggested that concerns about the reset clause served as a rationale to dismiss Johnson’s higher offer. Prior to his departure in February 1989, Johnson received compensation exceeding $60 million from the buyout deal. In March 1989, leadership transitioned to Louis V. Gerstner from American Express.
Post-KKR Acquisition Developments
On April 27, 1989, RJR Nabisco declared its decision to move its corporate headquarters to the New York metropolitan area.
After the buyout, RJR Nabisco proceeded to divest multiple business units:
- The UK operations of Nabisco, which included Smith's and Walkers, along with Belin in France and Saiwa in Italy, were sold to BSN; shortly thereafter, Smith's and Walkers were resold to PepsiCo.
- Chun King was transferred to Yeo Hiap Seng.
- Associated Biscuits International, which held investments in India's Britannia and Pakistan's English Biscuit Manufacturers, was sold directly to Britannia Industries.
- Fresh Del Monte Produce was acquired by Polly Peck.
- Del Monte Foods changed hands to Merrill Lynch, Citicorp Venture Capital, and Kikkoman; meanwhile, Del Monte’s Asian divisions (excluding the Philippines) were separately acquired by Kikkoman.
- The company’s 20% ownership stake in ESPN Inc. was sold to Hearst Communications.
The buyout also triggered considerable layoffs, with over 2,000 positions eliminated. Of those displaced, 72% were rehired at less than half their former salaries, taking an average of 5.6 months to secure new employment.
On March 21, 1991, RJR Nabisco Holdings Corp. became a publicly listed entity. In March 1999, the international segment of R.J. Reynolds Tobacco was sold to Japan Tobacco, leading to the creation of Japan Tobacco International. By June of that year, the remaining R.J. Reynolds Tobacco assets were divested to shareholders. The parent organization transitioned into Nabisco Group Holdings, which retained an 80.5% interest in Nabisco Holdings. In 2000, Philip Morris completed the acquisition of Nabisco Holdings. Shortly after this transaction, R.J. Reynolds Tobacco Holdings announced its purchase of Nabisco Group Holdings, finalizing the acquisition in December 2000.
Advertising on Non-Smoking Flights
In April 1988, RJR Nabisco ended its partnership with the Saatchi & Saatchi advertising agency after the agency created a commercial for Northwest Airlines that highlighted the airline’s ban on smoking during flights. This termination occurred even though Saatchi & Saatchi had been engaged exclusively for Nabisco product promotions and not for tobacco-related advertisements.
Pandora Papers Revelation
In 2021, prior to its dissolution, RJR Nabisco appeared in the Pandora Papers disclosures following reports that the law firm Baker McKenzie had established offshore shell companies in Cyprus linked to the corporation.