2 to Share Top RJR Nabisco Post : Pair of Senior Executives to Fill Gerstner’s Spot
RJR Nabisco on Friday named a pair of top executives to share the title of chairman and chief executive less than an hour after Louis V. Gerstner Jr. was officially tapped to become chairman and chief executive of International Business Machines Corp.
Lawrence R. Ricciardi, general counsel and an executive vice president of the food and tobacco giant, and Karl M. von der Heyden, its executive vice president and chief financial officer, assume their new positions immediately. Gerstner will remain on the company’s board of directors.
RJR said the two men will continue to directly manage their respective legal and finance operations. The company’s major operating units--R.J. Reynolds Tobacco, R.J. Reynolds Tobacco International, Nabisco Foods Group and Nabisco International--will remain under the control of their respective management teams.
“This promises to be a seamless transition,” predicted John C. Maxwell Jr., an analyst with Wheat First Securities in Richmond, Va. “Gerstner was good, and these guys are good.”
Investors seemed unperturbed by the news. In heavy trading on the New York Stock Exchange, RJR Nabisco common closed at $8 a share, unchanged.
“We are, of course, sad to see Lou Gerstner go to IBM,” said RJR Nabisco board member Henry Kravis, whose buyout firm Kohlberg Kravis Roberts & Co. engineered the $25-billion takeover of RJR Nabisco in 1989.
But he added that, as “the most senior corporate members” of Gerstner’s team, Von der Heyden and Ricciardi “developed and implemented much of the company’s refinancing strategy and worked very closely with their colleagues . . . on virtually every important business issue.”
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“Having already resolved the company’s most critical financial issues and developed sound business strategies that are working well, I have every confidence that their efforts to build additional value for shareholders will also be successful,” Kravis said.
RJR Nabisco said it does not expect the management changes to have an effect on the company’s plan to create a separate class of stock to represent its worldwide food business.
Earlier this month, the company said it would ask shareholders to approve a plan that would raise $1.7 billion by selling to the public stock tied to the performance of its food products, which include Oreo cookies, Ritz crackers and Planters nuts.
The plan, designed to attract investors who shun tobacco issues, comes at a time when the tobacco industry’s problems are multiplying. There is increasing evidence of health damage caused by secondary smoke, and President Clinton is mulling higher taxes on cigarettes.
“All the tobacco stocks are under pressure because of uncertainties about excise taxes and their effects on the tobacco business,” Maxwell said. “There’s really very little any manager can do to alter that reality.”
RJR Nabisco’s food business accounted for $6.7 billion in revenue in 1992, or about 43% of the parent’s total of $15.7 billion. The tobacco business accounted for the balance, or $9 billion.
At the press conference, Gerstner denied that he was abandoning RJR Nabisco at a difficult juncture. While Gerstner said a chief executive’s job “is never done,” he was responsible for slashing RJR Nabisco’s debt load to about $14 billion, regaining investment-grade status for the company’s outstanding bonds and slowly building back earnings.
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As it became more apparent in recent days that Gerstner was IBM’s likely choice, concern mounted that he might raid RJR Nabisco’s management. Ricciardi, 52, was a longtime Gerstner ally, dating back to their days together at American Express Co. in the 1970s.
Quashing those concerns, Gerstner stressed at the press conference that “KKR (Kohlberg Kravis Roberts) and I are close associates, and we will treat each other respectfully.” Ricciardi worked for American Express in various legal capacities between 1973 and 1989, when he joined RJR Nabisco.
Von der Heyden, 56, also joined RJR Nabisco that year after serving as senior vice president and chief financial officer of H.J. Heinz Co. Prior to joining Heinz in 1980, he was a vice president for the Pepsi-Cola Bottling Group.
