RJR Nabisco Is Target of $20.28 Billion Tender Offer

The investment firm Kohlberg Kravis Roberts & Co. announced today it will begin a $20.28-billion tender offer for RJR Nabisco Inc.

The Kohlberg Kravis announcement came four days after managers of the food and tobacco products company said they were considering taking the manufacturer private for nearly $17 billion.

“Management has decided that the company should be sold. Our offer is a better one,” Henry Kravis, a partner in the New York-based leveraged buyout specialist firm, said in a statement. The Kohlberg Kravis offer was for $90 a share in cash and securities, compared to the management buyout proposal of $75 a share in cash.

Investors reacted enthusiastically to the news. RJR Nabisco stock shot up $10.37 1/2 a share to $87.12 1/2 in early New York Stock Exchange trading today.

Kohlberg Kravis had been expected to enter the whirlwind of bids for food companies that began with a $5.23-billion bid for Pillsbury Co. by Grand Metropolitan PLC, a British company.

Kravis said his company had raised an equity pool of $5.6 billion for leveraged buyouts. In a leveraged buyout, investors borrow heavily to buy out a company and then pay off the debt with the target company’s cash flow or the sale of its assets.

Securities analysts said last week the plan by RJR Nabisco management was a preemptive strike to protect the company that manufactures many well-known brand names, including Winston and Camel cigarettes and Oreo cookies, from an unwanted suitor.

RJR Nabisco President F. Ross Johnson and other executives made their announcement after Philip Morris Cos. Inc. offered more than $11 billion for Kraft Inc., the processed foods manufacturer.

Kohlberg Kravis had been thought to be considering a bid for Kraft, which late Sunday rejected the Philip Morris bid and announced a $13.59-billion recapitalization plan. (Story on Page 6.)