Reynolds Heir Blasts Nabisco Executives : Says Buyout Plan Benefits Them at the Expense of Shareholders

A grandson of tobacco company founder R. J. Reynolds has accused RJR Nabisco Inc. executives of trying to amass personal fortunes through the bidding war for the tobacco and consumer products giant.

“It is clear that the purpose of this transaction is to make a large profit for these executives by selling off certain of the company’s businesses and assets and by taking other steps to restructure and increase the profitability and value of the company,” Smith W. Bagley said in a letter to Charles Hugel, chairman of a special committee reviewing bids for the conglomerate.

Bagley, an heir to the Reynolds tobacco fortune, said the letter was written on behalf of himself “and certain other stockholders of RJR Nabisco.”

Last month, RJR Nabisco President F. Ross Johnson announced a plan to take the company private in a $17-billion leveraged buyout. If the group were successful, he and other top executives could end up owning 20% of the company, published reports have said. That equity would be worth several billion dollars.

Johnson has denied claims that the management group would be excessively compensated in such a buyout.

Outlines Steps

Bagley, who is a substantial stockholder in RJR Nabisco, outlined steps he said the company took to pave the way for the management buyout plan, including:

- RJR Nabisco’s purchase in April of 21 million shares for $53.50 each. (The company’s stock currently is trading for around $89 a share.)

- The adoption of a “poison pill” defense to thwart outside bidders “not acceptable to management.”

- The preparation “at stockholder expense of financial studies, analyses and projections concerning a restructuring of the company and the sale of certain businesses.”

Bagley said the management group tried to discourage bidding by the buyout firm Kohlberg Kravis Roberts & Co., which launched a $20.23-billion tender offer, and by a group led by Forstmann Little & Co., which has expressed interest in making an offer.

“For the executive management of this company . . . to devise a plan to take the company private and to divert for themselves profits properly accruing to the public stockholders and then to undermine competitive bidding, would be self-dealing and a breach of fiduciary duty,” he said.

“The stockholders have been paying these top executives, and paying them handsomely, to run the company for the stockholders’ benefit and not to acquire it at the stockholders’ expense.”

A spokesman for RJR Nabisco declined to comment on the letter.