Round 2 of RJR Sale Draws 3 Formal Bids

The history-making bidding contest for RJR Nabisco drew three new formal bids Tuesday, amid predictions that company directors may decide the fate of the tobacco and food giant as early as today.

Second-round bids were filed in late afternoon by the three major bidders: a group consisting of RJR’s management, Shearson Lehman Hutton and Salomon Inc.; the Kohlberg Kravis Roberts buyout firm, and a group led by the First Boston investment firm.

A special committee of five non-management directors immediately began reviewing the voluminous bids at the offices of the New York law firm of Skadden, Arps, Slate, Meagher & Flom. The full board was scheduled to meet early this morning to examine the proposals, an RJR spokesman said.

The spokesman declined to provide details of the bids, or to say whether additional bids were submitted. But knowledgeable observers said they considered the possibility of other bids remote.

Some analysts have characterized the First Boston group’s earlier proposals as incomplete, but a spokesman for the firm said the latest submission was a “firm offer.” The bid was said to be similar in value and structure to the group’s first offer, which relied heavily on a tax loophole that is due to expire in December.

The First Boston group’s first bid was said to be worth as much as $27.18 billion, or $118 a share. KKR’s first round bid was worth $21.62 billion, or $94 a share, while the management-led group’s first round bid was valued at $23 billion, or $100 a share.

But analysts differ on which of the first-round bids was strongest.

Meanwhile, trading in RJR’s stock was heavy, as investors tried to evaluate whether to take their profits, or hold on and risk the chance that the auction might stall.

The stock gained $1.75 to close at $90.75. With 3.45 million shares changing hands, it was the most heavily traded issue on the New York Stock Exchange. RJR stock was trading at $55 when the management group began the protracted drama on Oct. 20 by announcing its offer to buy the company.

Advisers to the outside directors have tried this week to stimulate higher bids by commenting in published reports that they wanted to see a $100-a-share floor on offers in the second round of bidding. If bids did not reach that level, they might consider selling off assets themselves, they were quoted as saying.

Such comments immediately raised fears among some takeover-stock speculators that bidders might drop out, leaving RJR’s fate temporarily unresolved and dropping the bottom from under the stock. If the directors were to sell off pieces of the company themselves, it would take months, and might not ultimately fetch as much for shareholders as the pending bids, they contended.

“This process has gotten awfully ethereal,” said Sharon J. Kalin, an arbitrager. “It’s making me really, really nervous.”