RJR Nabisco on Monday said that American Express President Louis V. Gerstner Jr., an executive known for his marketing skills, will join the food and tobacco giant as its chief executive.
It was a surprise move that analysts said will bring a top-notch leader to RJR, recently bought in a $25-billion deal by Kohlberg Kravis Roberts & Co. He will replace F. Ross Johnson, the RJR chief executive who resigned after making a failed bid for the company.
Despite his lack of experience in the food and tobacco business, analysts praised the 47-year-old Harvard MBA as a smart choice for RJR. "He is considered one of the best managers in the business in America today," said analyst Brenda Davis McCoy, who covers the financial services industry for PaineWebber. "He knows the consumer markets very well and knows how to analyze consumer tastes."
Henry R. Kravis, a founding partner of Kohlberg Kravis Roberts & Co., said in a prepared statement that Gerstner "has widely acknowledged talents for developing a comprehensive business strategy and creating a dynamic, entrepreneurial culture in a large organization."
Analysts say Gerstner, who reportedly will make at least $2.3 million during his first year at RJR, will have to move fast to deal with the trauma caused by the recent KKR takeover. KKR has made it known that certain parts of the company will be sold off "and this creates a tremendous amount of morale problems," said analyst Roy D. Burry, at Kidder, Peabody & Co. "He has to talk to people and may have to act rather quickly."
Along with working on the sale of some divisions, Gerstner is expected to quickly begin reviewing the company's marketing and spending plans. One analyst predicted that Gerstner would have "complete autonomy" to deal with marketing and operational matters.
Gerstner, who will join RJR on April 3, said in a news release: "The great strengths of the company are its people, its brand loyalties, its consumer franchises and its strong market positions. Together, the people of RJR Nabisco and I will work to further improve the company, grow it, and make it a creative and exciting place to work."
Gerstner, who met Monday with RJR executives in the company's Atlanta headquarters, was not available for further comment. A company spokeswoman said Gerstner was expected to meet with top managers at the company's divisions in the next few days.
For American Express, analysts said, the departure may pose some short-term problems but will not be a major blow.
"They are going to keep growing," said analyst Perrin Long at Lipper Analytical Services. "But his insights and managerial skills will be missed."
Robinson to Step In
American Express officials said that Gerstner's duties will be assumed by Chairman James D. Robinson III. Aldo Papone, president of the firm's Travel and Related Services division, will assume Gerstner's title as chairman of that division.
Analysts say they expect the company to eventually name a new president. "Whoever takes his place will have an impact on the future strategic direction of the company," said Davis McCoy.
Some took the news as an omen for American Express, which owns IDS and 62% of Shearson Lehman Bros. At Kidder, Peabody & Co., analyst Alison Deans lowered her rating on American Express' stock after news of the Gerstner's departure.
Word of Gerstner's appointment surprised many industry analysts and even board members at American Express. "I didn't know it was coming and I don't think anybody knew it was coming," said one board member, whose initial reaction to the news was, "Jesus Christ!"
'Too Good to Refuse'
On Friday morning, Gerstner told American Express' Robinson that he had been made an offer and would make up his mind by the end of the day, according to company spokesman Lawrence A. Armour. Later that day, he told Robinson he had decided to leave.
"Lou left the house in very good order," said Armour. "But the offer was too good to refuse."
Ironically, it was Robinson who had teamed up with Johnson to make the failed buyout offer for RJR.
Gerstner, a former consultant with McKinsey & Co., joined American Express in 1978 as the head of its American Express Card division. His marketing skills and strategies were credited with triggering dramatic increases in sales and profits at the once-sluggish division, and his success helped propel him to the company's presidency in 1985.
But with little chance for Gerstner to move up to the top job at American Express in the near future--Robinson is not expected to retire for at least 12 years--he may have been eager to move elsewhere. "Lou is a very personable guy," said Long at Lipper Analytical. "But more than anything else, he is a leader more than a follower."