LANDMARK TOBACCO SETTLEMENT : RJR Confirms LeBow Won Vote to Split Company
RJR Nabisco Holdings Corp. confirmed that financier Bennett LeBow narrowly won a recent nonbinding shareholder vote urging the board to spin off RJR’s food business immediately.
The news came as LeBow turned up the heat on RJR to spin off its food unit by unveiling a plan Wednesday that could rid the giant company of tobacco lawsuits.
The threat of massive tobacco liability has been one of the chief arguments cited by RJR in its decision to keep its food and tobacco operations united despite acknowledgment that shareholders want them split apart.
Industry experts said LeBow, who is trying to unseat the RJR board, has now poked a hole in that reasoning.
Brooke Group Ltd. said Wednesday that it has agreed to settle a class-action suit that has been hanging over the tobacco industry for two years. LeBow is chairman of Brooke, which owns Liggett Group Inc., maker of L&M; and Chesterfield cigarettes.
Among other things, the settlement will release Liggett from a pending class-action lawsuit in exchange for the cigarette company’s handing over as much as 5% of its annual pretax profit for the next 25 years.
Although RJR vowed Wednesday to keep fighting tobacco lawsuits, the tobacco unit would be pulled into the settlement if it merged with Liggett, according to the statement released Wednesday by Brooke.
A merger could occur if LeBow and fellow investor Carl Icahn, who together own 4.8% of RJR, win the proxy fight and install their own board members who are committed to a spinoff of the 80.5%-owned Nabisco Holdings Corp.
RJR has repeatedly accused LeBow of seeking the Nabisco spinoff to merge Liggett with RJR’s R.J. Reynolds Tobacco Co.
“Now that Liggett has this bulletproof vest to offer, maybe the shareholders wouldn’t care about the fact that Brooke Group may press to have RJR and Liggett merged,” said David Drake, an analyst at Institutional Shareholder Services, which is analyzing the Brooke proxy proposal.
RJR, the New York-based maker of Winston and Camel cigarettes, said 50.6% of the company’s shares outstanding voted in favor of the consent solicitation, slightly more than the 50.4% LeBow claimed last month.
“We want shareholders to know that implementing a spinoff of Nabisco will remain a ‘front-burner’ issue for the company,” RJR said.
RJR has said that no matter what the outcome of the vote, it would not try to spin off its stake in Nabisco Holdings until it was confident that lawyers pursuing liability cases against the tobacco industry wouldn’t be likely to win a temporary injunction blocking the spinoff. Today’s statement doesn’t signal any change in that position.
