Nabisco Group Board Rejects Icahn’s Latest Bid for Control

Nabisco Group Holdings Corp. on Monday again rebuffed a bid by financier Carl Icahn to seize control of the company, but this time Nabisco Group said it would weigh alternative moves--including a sale of the firm.

Nabisco Group’s sole asset is an 80.5% ownership stake in Nabisco Holdings Corp., the snack maker whose products include Ritz crackers, Oreo cookies and LifeSavers candies.

The rest of Nabisco Holding’s stock is publicly held. The company was created in June when RJR Nabisco Holdings spun off its cigarette business--now called R.J. Reynolds Tobacco Holdings Inc.--in the face of mounting litigation against the tobacco industry.

Icahn last week proposed making a tender offer of $13 a share for up to 100 million shares of Nabisco Group, which, combined with Icahn’s current ownership of its stock, would give him 40% stake in the firm.

The financier said that if he got control of Nabisco Group, he would move to replace its directors with his own nominees and their “first order of business” would be to sell the company.

Nabisco Group said Monday that its current board unanimously rejected Icahn’s offer as “inadequate” because it does “not come close to reflecting the underlying value of the business.”

But it did hire two investment bankers to explore other options, including either the sale of the company--just as Icahn had sought--or the sale of Nabisco Group’s majority stake in Nabisco Holdings.

“You could give Icahn credit for this,” said Timothy Ghriskey, a senior portfolio manager at Dreyfus Corp. “He’s been persistent and he’s made something happen.”

Nabisco Group’s announcement came shortly before financial markets closed Monday. The firm’s stock finished the day at $12.38 a share, up 31 cents. Nabisco Holding’s stock was halted in the afternoon pending the announcement--at $32.38 a share, up 13 cents from Friday’s close--and trading did not resume before the close. Both trade on the New York Stock Exchange.

Icahn has argued that even though Nabisco Group’s sole asset is its ownership of Nabisco Holdings, Nabisco Group trades at a sizable discount to the food company because investors feel Nabisco Group is still tainted by the prospect of tobacco-related liability.

Icahn, who was not available for comment, has said Nabisco Group should merge with another food company to unlock its true value. Of course, that also would mean a big payday for Icahn, because a merger would probably provide a premium over what Icahn paid to buy his current 8.9% stake in Nabisco Group.

Meanwhile, Icahn’s offer to launch a tender offer was contingent on Nabisco Group scrapping a “poison pill” anti-takeover defense that it adopted recently. But the company made no mention of doing so.