RJR Nabisco Settles Suit With Met Life Over Buyout

RJR Nabisco Inc. said Thursday that it had settled two lawsuits filed in connection with its $24.53-million leveraged buyout, including an action brought by Metropolitan Life Insurance Co.

The Met Life suit centered on $225 million in RJR Nabisco bonds the insurance company held prior to the 1988 bidding war for the food and tobacco giant. Shortly after the takeover fight began, Met Life charged that it had lost $40 million because the battle had depressed the market price of the bonds.

RJR Nabisco said Thursday that as part of the settlement, Met Life would participate in a loan to finance an RJR Nabisco employee stock-ownership plan. Met Life would acquire a $125-million share of the ESOP loan in exchange for the same amount of “pre-LBO” bonds.

Met Life would also swap $30 million in bonds for common stock in RJR Nabisco Holdings Corp., RJR Nabisco said.

And in December, 2002, Met Life and holders of other RJR Nabisco bonds due in 2016 and 2017 would be able to exchange the pre-LBO securities for cash and common stock or all cash, RJR Nabisco said.

RJR Nabisco also said it had settled a class-action suit filed on behalf of former shareholders and holders of the bonds that financed the company’s buyout. The suit resulted from the 1988 bidding war and RJR Nabisco’s recent recapitalization, the company said.

RJR Nabisco did not announce terms of the settlement but said they would have no material effect on its finances.

Top RJR Nabisco managers opened the takeover battle for the company in October, 1988, saying they were considering a $17-billion bid. The investment firm Kohlberg Kravis Roberts & Co. then unveiled a $20.28-billion offer.

The bidding war escalated until early December, when the RJR Nabisco board selected the Kohlberg Kravis $24.53-billion offer.