Financier Concedes Defeat in Fight to Split Up RJR
Financier Bennett LeBow admitted defeat Tuesday in his six-month quest to split up food and tobacco producer RJR Nabisco Holdings Corp., a company well-acquainted with titanic corporate struggles.
LeBow’s disclosure came a day before shareholders were to vote on his proposal to break up RJR, which seven years ago found itself engulfed in the biggest takeover in U.S. history. That battle spawned a best-selling book and came to symbolize the 1980s takeover craze.
This time, however, the fight was not to buy the company but to force it to split into separate food and tobacco producers.
At a New York news conference, LeBow conceded that his nominees to serve on RJR’s board would not win election and therefore they would not be in a position to push through the spinoff.
“Although this result is obviously disappointing, it comes as no surprise to us,” he said. “We always knew we were facing an uphill battle, made even tougher by the swirl of recent events in the tobacco industry, and none of the analysts expected us to win this time.”
LeBow’s partner in the effort was investor Carl Icahn, who did not attend the news conference and who has stayed out of the spotlight. A telephone call to Icahn’s office seeking comment was not immediately returned.
Together, the two men control nearly 7% of RJR stock. They had pushed specifically to force the producer of Camel and Winston cigarettes and Oreo cookies to spin off the 80.5% stake it owns in the Nabisco food business to RJR’s shareholders.
LeBow’s capitulation comes a month after he agreed to settle a nationwide class-action suit against the tobacco industry. The settlement offer was intended to boost his chances of succeeding with RJR, but the company’s stock plummeted and gave RJR fresh ammunition against LeBow.
“I think it’s a victory for RJR but they will feel pressure for a spinoff,” said Diana K. Temple, a securities analyst who follows the tobacco industry at Salomon Bros. Inc.
Indeed, LeBow said he remains committed to an immediate spinoff.
RJR’s shareholders are scheduled to gather today for the company’s annual meeting in Winston-Salem, N.C., and vote on LeBow’s and Icahn’s slate of directors. LeBow said he did not plan to attend the meeting.
An RJR spokeswoman declined comment on LeBow’s announcement, citing the upcoming meeting and shareholder vote.
In defeat, LeBow seemed to take solace in his expectation that the shareholder vote was headed for a low turnout. As an investment, his and Icahn’s accumulation of RJR shares appears disappointing.
The effort to split RJR Nabisco began on Oct. 30, when LeBow announced he had recruited Icahn and was launching an effort to win the support of shareholders to force RJR to split up the company. That day, RJR stock closed at $30.75 on the New York Stock Exchange.
On Tuesday, after LeBow’s announcement, RJR closed up 25 cents at $29.875.
