RJR Woos Shareholders by Raising Dividend
RJR Nabisco Holdings Corp., bowing to shareholders unhappy with the company’s sluggish stock price, rewarded them Tuesday by announcing a 23% dividend increase and $100-million share buyback.
The unexpectedly aggressive action came as the food and tobacco giant faces a fierce proxy fight from investors Bennett LeBow and Carl Icahn, who are seeking an immediate spinoff of the company’s Nabisco Holdings Corp. food unit.
“The actions we are taking today mark an important step in our effort to add real value to our shareholders’ investment,” said Chief Executive Steven Goldstone. “I want shareholders to know, however, that this is not the last step.”
The company also reaffirmed its commitment to a “responsible spinoff” of the company’s 80.5% stake in the Nabisco food business as soon as possible. RJR has said it will not spin off Nabisco before 1997.
“I speak for every member of our board of directors in saying we are committed to spinning off Nabisco as soon as we believe that it can be done successfully. Implementing a spinoff will remain a ‘front-burner’ issue for RJR Nabisco,” Goldstone said.
RJR closed at $34.875 Tuesday, up 25 cents on the New York Stock Exchange.
The company announced the steps a day after Brooke Group Ltd. said it began mailing proxy materials to RJR shareholders in its effort to force an immediate spinoff of the food business. LeBow, who is chairman of Brooke, and Icahn hold a 4.8% stake in RJR.
RJR said its board had voted to boost annual dividends by 23%, to $1.85 per common share from $1.50 per common share. The increase brings its quarterly dividend to 46.25 cents a share from 37.5 cents.
It said the board also authorized the repurchase of up to $100 million shares of stock this year and approved the adoption of a plan to buy back 10 million shares over the next several years based on the achievement of performance targets.
The move exceeded Wall Street’s expectations and experts said it reflected well on RJR under the leadership of Goldstone, who was named chief executive officer in December.
“It’s the most positive thing they’ve done for their shareholders since this company went public in 1991,” said David Adelman of Dean Witter.
Although Brooke quickly assailed the plan by calling it a ploy to keep the company in one piece, experts said the aggressive actions will likely help RJR defend itself in the proxy fight.
“I think this will buy a little time for Goldstone and buy him some votes,” said Don Yacktman, president of Yacktman Asset Management, which owns 1.275 million shares of RJR.
“They should have done this a long time ago, but it’s another way to steal shareholder votes away from LeBow’s camp,” said Michael Schroeder of First International Asset Management.
