Ever wondered what it takes to stage the most audacious corporate takeover in history? How did Ross Johnson rise from being a mid-level manager to the CEO of RJR Nabisco, and what led him to consider a leveraged buyout despite potential disasters? What made Henry Kravis of KKR a formidable opponent in this high-stakes game? Dive into this riveting tale of ambition, power, and the ruthless depths of corporate takeovers that reshaped America's financial landscape.

Barbarians at the Gate: The Fall of RJR Nabisco

It was a serene Florida afternoon when Steve Goldstone, a lawyer fresh from New York, sat on the back porch with Ross Johnson, the CEO of RJR Nabisco. The picturesque landscape contrasted sharply with the gravity of the conversation at hand. 

Johnson was considering a colossal move—a leveraged buyout (LBO) of his own company. A leveraged buyout (LBO) is a transaction where usually a company buys another company using a large amount of borrowed money, or debt, instead of its own capital. Goldstone thought the decision was reckless given the potential risks and losses involved. Despite Goldstone's dire warnings about losing everything from corporate jets to a Palm Beach villa, Johnson remained resolute.

Days later, in Atlanta, the directors of RJR Nabisco gathered at the Waverly Hotel, unsure of what awaited them. The atmosphere was tense, with whispers and anxious glances filling the room. Johnson addressed the board, explaining the company's undervaluation and his belief that an LBO was the best option for shareholders. While some directors voiced concerns about the potential fallout and the risk of losing control to higher bidders, Johnson's persuasive charm and confidence swayed the room. The board reluctantly agreed to let him proceed.

Johnson's journey to this point was a tale of relentless ambition and transformation. Starting as a mid-level manager in Canada, he climbed the corporate ladder with a mix of charisma, audacity, and strategic cunning. At Standard Brands, he surrounded himself with a loyal team, the "Merry Men," and overhauled the company's staid culture with his irreverent, high-energy style. Known for his lavish spending and penchant for celebrity friendships, Johnson's leadership was marked by constant upheaval and bold moves.

When Standard Brands merged with Nabisco, Johnson's dynamic approach clashed with Nabisco's conservative culture. Yet, he gradually replaced Nabisco's old guard with his own team, pushing through significant changes and leading the company through the intense "cookie wars" against competitors like Frito-Lay and Procter & Gamble. His ability to navigate corporate battles and his flair for deal-making became legendary.

Now, at the helm of RJR Nabisco, Johnson was poised to orchestrate the largest LBO in history, a move that would either cement his legacy or lead to dramatic consequences. As the board gave its tentative approval, the stage was set for one of the most audacious corporate maneuvers ever attempted.

Will Johnson's Bold LBO of RJR Nabisco Redefine Corporate History or Lead to Ruin?

Imagine growing up in a cherished old house, only to return one day to find it turned into a brothel. That's how a former RJR Nabisco employee in Winston-Salem felt about the company's transformation. 

The RJR Company wasn't just a business; it was the lifeblood of Winston-Salem, North Carolina. Its twenty-two-story headquarters was so iconic that it inspired the Empire State Building in New York. The company’s influence stretched across the city, from the towering skyscraper housing North Carolina’s biggest law firm to the Bowman Gray School of Medicine named after a former chairman. 

R.J. Reynolds, the man behind the empire, embodied the New South's entrepreneurial spirit. He started his business in 1874, in a town bustling with competing tobacco companies. Reynolds distinguished himself by innovating and expanding aggressively, even living above his factory floor for years. His relentless drive made Reynolds Tobacco the leader among the area's many tobacco companies by the 1890s.

But the company’s success attracted the attention of James Duke's national tobacco trust. Despite Reynolds' vow to fight Duke, he eventually sold a two-thirds stake in his company to Duke's trust in 1899. However, Reynolds managed to expand under the trust's control, becoming the biggest employer in North Carolina. After the trust was dissolved in 1911, Reynolds celebrated his independence and continued to innovate, launching the first nationally distributed pipe tobacco, Prince Albert, and later, Camel cigarettes.

Camel became a phenomenon, redefining the tobacco business. By the time R.J. Reynolds died in 1918, his company was a major player in the tobacco industry. The company continued to thrive under local leadership, deeply rooted in the Moravian work ethic and values. However, the rise of health concerns about smoking in the 1960s led Reynolds to diversify into the food business, acquiring brands like Hawaiian Punch and Chun King.

The 1970s brought more changes, with the rise of ambitious leaders like Paul Sticht and Tylee Wilson. Sticht, a former retailer, brought a more global perspective to the company, while Wilson focused on modernizing Reynolds' factories. The company's culture began to shift, with a growing divide between the old guard and the new.

The 1980s saw Reynolds' biggest transformation yet: the merger with Nabisco Brands, headed by the charismatic Ross Johnson. The merger, the largest ever outside the oil industry, was supposed to create a consumer-goods superpower. But the cultural clash between the two companies became apparent, with Nabisco's more ostentatious style clashing with Reynolds' conservative roots.

Despite initial optimism, the merger exposed deep rifts within the company. Johnson's quick ascent to power and his smooth charm contrasted sharply with Wilson's rigid, bureaucratic style. Johnson's eventual takeover as CEO marked the end of an era for Reynolds, leaving a legacy of both innovation and internal strife.

In the end, the story of RJ Reynolds Tobacco Company is one of transformation, ambition, and the inevitable clash of old values with new realities. It's a tale of a company that shaped a city and redefined an industry, but also one that struggled to adapt to a changing world.

From Tobacco Titan to Turbulent Merger: The RJR Nabisco Saga

Ross Johnson’s rapid climb to CEO of RJR Nabisco saw him shaking up the status quo at every turn. From 1984 to 1986, Johnson quickly moved up the ranks, but small-town Winston-Salem was never a good fit for his high-octane style. His aggressive management saw the Reynolds old guard replaced with his Nabisco cronies, a move that didn’t sit well with the locals. Johnson’s lavish perks, like Gulfstream jets and luxury apartments, only added fuel to the fire of local gossip.

Johnson’s troubles only deepened as he struggled with Winston-Salem’s resistance to his changes. The town’s elite, unimpressed with his wife Laurie, or “Cupcake” as they called her, spread rumors about her infidelity. Despite his best efforts to fit in, Johnson’s flashy lifestyle and the relocation of RJR Nabisco’s headquarters to Atlanta marked him as a pariah in the small town.

Johnson’s tenure was marked by constant restructuring and a penchant for grandiose ideas. His attempts to boost the company’s stock price, including the development of the smokeless cigarette Premier, were met with skepticism and poor market performance. The company’s lavish spending, including the infamous “Taj Mahal” hangar for corporate jets, symbolized the opulence and restlessness that defined Johnson’s leadership.

As the stock market crashed in 1987, Johnson’s frustrations grew. Despite efforts to improve the stock price, including stock buybacks and potential joint ventures, nothing seemed to work. The low stock price made RJR Nabisco a prime takeover target, attracting the attention of Wall Street dealmakers.

Amidst all this, Johnson faced a personal crisis when his son Bruce was involved in a severe car accident, leaving him in a coma. This tragedy pushed Johnson to dive even deeper into work, exploring a leveraged buyout (LBO) as a possible solution to the company’s woes. Despite initial skepticism from his advisers and the complexities involved, Johnson couldn’t shake the idea.

The possibility of an LBO led Johnson to consult with Shearson Hutton, who began analyzing the feasibility of such a move. Meanwhile, Johnson continued to entertain other options, including a joint venture with Philip Morris and various acquisition targets.

Ultimately, Johnson’s relentless pursuit of action and his inability to leave well enough alone defined his tenure at RJR Nabisco. His story is a testament to the high-stakes world of corporate America, where ambition and restlessness often collide with reality.

Did Ross Johnson's Bold Moves at RJR Nabisco Spark Innovation or Invite Chaos?

Outside the Metropolitan Museum on a blustery September evening, the elite of New York society gathered, clutching invitations as stiff as Sheetrock. Among them were the Saul Steinbergs, Carol and Punch Sulzberger of The New York Times, and many others, all heading to a grand event hosted by Henry Kravis and his wife, Carolyne Roehm, who had secured the venue with a $10 million donation.

Kravis, a diminutive man with a ready smile and a voice tinted with his Oklahoma roots, might have been overshadowed by his stunning wife. Roehm, taller and agonizingly thin, stole the spotlight in an emerald green satin charmeuse gown and a matching necklace. The couple had invited the teenage violinist Midori to perform, enthralling their guests with her dulcet tones.

The Medieval Court's ambiance transitioned into a lushly decorated Blumenthal Patio for dinner, featuring lavish centerpieces and exquisite wines. Over rabbit pie and baba au rhum, the guests marveled at a special Degas exhibit, and society columnist Suzy later declared it "superb from beginning to end."

This event marked Kravis and Roehm's social coronation, projecting their influence far beyond Wall Street into the heart of Manhattan's high society. Despite his enigmatic nature, Kravis's swift rise in leveraged buyouts had transformed him into a financial titan, controlling businesses from Duracell to Safeway with a war chest greater than some countries' GDPs.

Kravis's journey began in Tulsa, where his father's financial ups and downs instilled a drive for success. Despite a lackluster academic start, Kravis's ambition saw him through Columbia Business School and into the world of high finance. His early ventures, marked by perseverance and a hint of ruthlessness, prepared him for the cutthroat arena of Wall Street.

At Bear Stearns, under the mentorship of Jerry Kohlberg, Kravis honed his skills in leveraged buyouts. The firm's philosophy of buying family businesses using borrowed money, cutting costs, and selling them at a profit laid the groundwork for what would become Kravis's hallmark strategy. However, internal politics at Bear Stearns led Kravis, Kohlberg, and Kravis' cousin George Roberts to form their own firm, Kohlberg Kravis Roberts & Co. (KKR).

KKR's methodical and often aggressive approach to buyouts led to unprecedented successes and returns, attracting the attention of high-profile investors and solidifying their dominance in the financial world. Their audacious deals, often involving billions of dollars, redefined the landscape of corporate America.

Kravis' personal life, intertwined with his professional persona, was equally compelling. His relationship with Carolyne Roehm, a fashion designer who transformed from Jane Smith of Kirksville, Missouri, to a style icon, was a testament to their shared ambition and flair for the dramatic. Their high-profile marriage and lavish lifestyle became the stuff of legend, cementing their status as the ultimate power couple.

Yet, this glittering exterior belied intense internal struggles and strategic maneuvers that defined Kravis's career. His journey from a boy navigating Tulsa's streets with painful contact lenses to the pinnacle of Wall Street power was marked by a relentless pursuit of success, often at the cost of personal and professional relationships.

As Kravis and Roehm continued to captivate both Wall Street and society, their story underscored the complexities and contradictions of wealth, power, and ambition in America's financial and social elite.

Henry Kravis and Carolyne Roehm: Wall Street Titans Conquer Manhattan's Elite

Johnson woke up early, the tension from the previous night’s board meeting still weighing on him. He was preparing for the compensation committee meeting at headquarters, followed by a full board meeting. As he read the morning paper, he found an article dismissing the possibility of RJR Nabisco being involved in a merger. He chuckled, thinking how wrong the analysts were.

Before leaving, he received a call from a worried employee about directors’ concerns over their pensions due to the LBO. At the meeting, Johnson urged them to table the pension discussions to avoid any appearance of influence, sensing the directors' displeasure.

As the day progressed, the press release announcing the LBO effort went out, causing an explosion of media attention. Calls flooded in from all over, and local reporters and a helicopter swarmed the headquarters. Bill Liss, RJR’s public relations chief, found himself in a crisis resembling his old days handling skyjacking incidents.

Meanwhile, Jim Robinson, at his mother’s house in Atlanta, received news of the impending press release about the LBO. He was surprised by the timing but not overly worried.

Wall Street was buzzing with talks of the upcoming presidential elections and the World Series. The merger business was the lone source of optimism, with firms like Merrill Lynch boasting high returns from their LBO portfolios. This atmosphere had investment bankers like Shearson’s Tom Hill and Morgan Stanley’s Eric Gleacher on high alert for new opportunities.

Kravis, hearing about Johnson’s plans, felt betrayed as he believed he had given Johnson the idea. Immediately, investment bankers and firms across Wall Street scrambled to respond to the news of Johnson’s LBO. 

Jeff Beck of Drexel, caught off guard, quickly realized the enormity of Johnson’s move. As the day ended, Kravis, determined not to let Johnson steal the company, began assembling his team for a counter-offer.

Throughout the weekend, the tension escalated. Kravis, convinced of foul play, decided to launch a $90-a-share tender offer for RJR Nabisco, a move that shocked everyone, including Johnson. Kravis’s bid, leaked to the press, forced his hand early Monday morning.

By Monday, the financial world was in a frenzy. Johnson, initially dismissive of the rumors, had to face the reality of Kravis’s aggressive bid. Kravis called Johnson, offering to work together, but Johnson remained noncommittal.

The leak’s source became a hot topic of debate. Kravis suspected both Jeff Beck and Bruce Wasserstein, leading to strained relationships and strategic misdirection throughout the takeover battle.

In the end, the aggressive moves and counter-moves set the stage for what would become the largest corporate takeover in history, with emotions and stakes running high on all sides.

Did Johnson's LBO Plan Spark the Most Intense Corporate Takeover Battle in History?

Theodore J. Forstmann, a well-known New York bachelor and Republican fundraiser, enjoyed a life of luxury, living in an opulent apartment with a view of the East River. At 49, he maintained an athletic build and a sharp tennis game. As the head of Forstmann Little & Co., a leveraged buyout firm, he commanded a world of corporate jets and high-end living.

Despite his success, Forstmann harbored deep resentment, particularly towards Henry Kravis of Kohlberg Kravis Roberts & Co. (KKR). This animosity stemmed from Kravis's extensive use of junk bonds in leveraged buyouts, which Forstmann viewed as financially irresponsible and damaging to the economy. His firm prided itself on avoiding such practices, aiming for solid, long-term investments.

Forstmann's anger was reignited one morning upon reading about KKR's bid for RJR Nabisco. He saw Kravis's offer as another reckless move fueled by junk bonds. The junk-bond cartel, led by Michael Milken of Drexel Burnham Lambert and epitomized by Kravis, had perverted Wall Street's priorities, Forstmann believed.

Forstmann's views were not just professional but deeply personal. His childhood was marred by an abusive, alcoholic father, leading him to channel his anger into sports and later, his career. His path to success was unconventional, marked by stints in law and finance, and a knack for high-stakes bridge games to maintain his lifestyle.

In 1974, at 35, Forstmann found himself nearly broke but seized an opportunity with Graham Magnetics, which led to the establishment of Forstmann Little & Co. With a reputation for integrity and solid returns, his firm stood in stark contrast to the quick-buck artists dominating the LBO industry.

The battle for RJR Nabisco brought these tensions to a head. Forstmann was determined to take a stand against Kravis and his methods. He saw the deal as a culmination of his crusade against junk bonds and financial irresponsibility. Forstmann's bid was not just about acquiring a company; it was a mission to expose Kravis's practices and save Wall Street from its excesses.

Despite his convictions, Forstmann faced internal and external challenges. His partners and even his girlfriend urged him to reconsider his stance against Kravis. Yet, Forstmann's resolve only grew stronger, leading him to publicly denounce the junk-bond culture in The Wall Street Journal.

The showdown over RJR Nabisco was a high-stakes game involving complex negotiations, deep-seated rivalries, and personal vendettas. Forstmann's battle was not just for a company but for the soul of Wall Street itself. His story is a testament to the power of conviction and the struggle to maintain integrity in a world driven by greed.

Wall Street Showdown: Forstmann vs. Kravis in the Battle for RJR Nabisco

The peace talks were off, and Cohen’s troops geared up for war. Kravis’s $90 tender offer forced Shearson to rethink their $75 bid. In a desperate bid to match Kravis’s financial sophistication, Shearson started shedding Johnson’s corporate perks to fund a higher bid. “All the planes, the penthouses, Premier, the country clubs, the Atlanta headquarters had to be napalmed,” recalled Tom Hill. Kravis’s introduction of PIK preferred stock, a financial masterstroke, had left Cohen’s junk-bond department scrambling.

Kravis, savvy and confident, wasn’t waiting around. Meanwhile, Johnson was struggling with the escalating bids, from the low eighties to the low nineties, making the debt payments unbearable. “How high is this thing going?” Johnson mused, realizing that overpaying would spell disaster.

Shearson’s desperation led them to consider a partnership with Salomon, but the internal squabbles were relentless. Tom Hill and Geoff Boisi clashed over the particulars of asset divestitures. The tension was palpable, with egos at war, making negotiations even more challenging.

Behind the scenes, personal dynamics added layers of complexity. Kravis’s strained relationship with Tom Strauss, stemming from past personal issues, affected their business interactions. Despite their history, Kravis reached out to Strauss, only to be met with resistance. The pressure mounted as Kravis learned that Johnson’s management was obstructing due diligence.

In a dramatic turn, Kravis and Johnson’s teams met secretly at the Plaza Hotel. Despite initial progress, the deal fell apart over Salomon’s refusal to let Drexel run the bond offerings, a detail that seemed trivial but was critical to Salomon’s pride.

The next day, Shearson launched a $92 bid, shocking Johnson, who felt he had lost control. The press got wind of Johnson’s management agreement, revealing potential gains of up to $2 billion, sparking outrage and mistrust.

As the battle intensified, Ted Forstmann’s group emerged as a new player. Forstmann’s bid was a direct challenge to Kravis and Shearson, adding another layer of complexity. Personal and professional betrayals abounded, with alliances shifting and tempers flaring.

In the end, the pursuit of RJR Nabisco was not just a financial battle but a clash of egos, personal vendettas, and strategic missteps. The story of this takeover bid is a testament to the high-stakes world of corporate finance, where billions of dollars and reputations hang in the balance.

Will the Battle for RJR Nabisco Be Defined by Ego or Strategy?

On November 7, the RJR Nabisco board gathered at Skadden Arps, a mix of anger and disbelief in the room. For weeks, they'd witnessed Ross Johnson turn their company into a $20 billion circus. The revelation of a secret management agreement was the final straw, sparking a growing anti-Johnson sentiment.

Vernon Jordan and others had called board chairman Charlie Hugel over the weekend, horrified by the details. The press had a field day, exposing Johnson's golden parachutes and restricted stock deals, further inflaming public and shareholder outrage. Letters poured in, demanding Johnson's firing and denouncing the greed.

Johnson’s favor-bestowing on the board came under scrutiny. The backlash against leveraged buyouts (LBOs) reached new heights, with figures like Martin Lipton and Alan Greenspan warning of economic dangers. Insurance companies sued RJR Nabisco, and Senate leaders called for tax code reforms to curb LBOs.

Employees were despondent, particularly in Winston-Salem, where Johnson's smokeless cigarette venture, Premier, was a disaster. Memes and cartoons mocking Johnson circulated, and workers even considered pooling money to buy the company themselves.

The board felt the heat most keenly. Hugel's judgment of Johnson had shifted dramatically. He pondered whether Johnson's young second wife, Laurie, was a factor in his behavior. Other board members, like John Macomber and Marty Davis, were equally disillusioned. The committee began considering restructuring the company independently.

On November 10, Johnson left for a quiet weekend in Jupiter, Florida, and Hugel learned of yet another unapproved raise Johnson had given. By Monday, November 14, Johnson was summoned to address the board. The meeting was tense, with Johnson defending his actions and Hugel confronting him about preselling company assets.

Kohlberg Kravis Roberts & Co. (KKR) was in chaos too. Their projections for RJR Nabisco were riddled with gaps, and crucial figures remained elusive. Scott Stuart, a young associate, was panicking, and confidence in their bid was waning.

Meanwhile, First Boston, led by James Maher, was desperate to join the fray. After Bruce Wasserstein and Joe Perella left, First Boston struggled to maintain its standing. Brian Finn proposed a complex restructuring plan using a soon-to-expire tax loophole, but it was a long shot.

On November 9, Maher’s team reached out to potential partners, eventually connecting with Jay Pritzker’s Resource Holdings. Despite initial skepticism, Pritzker agreed to pursue the bid. As the November 18 deadline loomed, First Boston scrambled to finalize their proposal.

By Friday, chaos reigned at First Boston. Lawyers and bankers frantically revised their bid letter, racing against the clock. Meanwhile, Johnson’s team faced delays, with documents arriving just minutes before the deadline.

Kravis and his team were similarly stressed, questioning their understanding of RJR Nabisco. In the end, bids were submitted amidst a flurry of last-minute changes and breathless sprints.

The battle for RJR Nabisco was a whirlwind of high-stakes drama, corporate intrigue, and relentless pressure. The board, employees, and bidders were all caught in the storm, each vying for control of the $20 billion behemoth.

RJR Nabisco: The $20 Billion Circus - High Stakes Drama and Corporate Intrigue

Ross Johnson and Henry Kravis weren't the only ones eyeing RJR Nabisco. By fax and FedEx, bids poured in like Wall Street's crank calls. Among the joke bids, a Maryland man topped at $126 a share. A Toronto banker offered $123 a share, plus $7 million for each committee member's vote.

In a 47th-floor conference room, legal eagles Peter Atkins and Mike Mitchell oversaw the chaos, knowing the night’s events might end up in court. Relief came as bids rolled in: Kravis at $94 a share, Johnson at $100. But a wild card entered—Jim Maher of First Boston promised up to $118 a share through Brian Finn’s strategy, hinging on tax deferrals.

Atkins’ team, amid Chinese takeout, scrutinized Maher’s bid. Matt Rosen, the tax counsel, realized the proposal’s viability rested on assumptions he had helped craft. Rosen’s close ties with Finn complicated things, but he cautiously confirmed the plan's potential.

Saturday, Kravis’s team faced a grilling but remained hopeful. Johnson, meanwhile, spent a nerve-wracking weekend at a Connecticut farm, gauging the board’s leanings. Sunday morning, the committee extended the auction, buying time for Maher’s team.

The week saw frantic behind-the-scenes maneuvers. Kravis’s group, initially downbeat, received a boost from Lazard’s Bob Lovejoy, who hinted at hidden savings in RJR. By Tuesday, they were ready to bid aggressively.

First Boston's struggle was real. Maher’s team faced setbacks, including a last-minute bailout by Chase Manhattan. A $200 million shortfall loomed until Jay Pritzker stepped up.

Bids were due Tuesday. Johnson and Cohen bet on a modest increase to $101, convinced Kravis was out. Kravis, however, delivered a surprising $106 bid, re-energizing the bankers.

The auction’s climax was a study in high-stakes drama, revealing the ruthless, strategic depths of corporate takeovers. The eventual winning bid and the fallout would reshape the financial landscape, leaving behind tales of ambition, betrayal, and corporate chess.

Who Emerged Victorious in the High-Stakes Battle for RJR Nabisco: Johnson or Kravis?

In the midst of high stakes and intense competition, the Shearson camp brimmed with confidence. Despite negative publicity, Cohen and Hill believed victory was near. Everything hinged on First Boston’s bid being accepted by the board, a scenario few considered likely.

In anticipation, Cohen celebrated his anniversary, while John Gutfreund and his team, waiting for news, indulged in poker and magazines. As hours passed without word, nerves frayed. Jim and Linda Robinson attended a Manhattan dinner, where Linda tried unsuccessfully to pry bid details from Eric Gleacher.

At Kohlberg Kravis, the tension was palpable. Pizza was ordered, and at nine, a call came: some members needed at Skadden Arps. Kravis, trying not to show excitement, headed to dinner but was soon summoned back. Dinner was rushed as they returned to Skadden, where they were informed their bid would be recommended if financing details were worked out.

Meanwhile, First Boston’s bid was dismissed for lack of solid backing, and Jim Maher accepted defeat. At Shearson’s camp, the lack of news led to frustration and frantic calls. Reports of Kravis being summoned to Skadden intensified the chaos.

Despite the turmoil, Kravis’s team remained hopeful. They discussed securities with Lazard and Dillon, confident the board would soon favor them. Then a twist: Shearson decided to bid again. Linda Robinson’s call to reporters reversed their earlier concession, reigniting the fight.

As the night wore on, Shearson’s team, led by Cohen, debated strategies. Johnson, now detached, agreed to another bid, though skeptical of its feasibility. At the board meeting, Kravis and Roberts made a compelling case, emphasizing security and care for employees. They were momentarily sidetracked by minute employee benefits negotiations but remained hopeful.

Shearson’s next bid, aggressive at $108, shocked Kravis but didn’t deter them. They raised their bid to $109, confident of winning in a tie. The board, under pressure, leaned towards Kravis, favoring their more secure and employee-friendly offer.

In the final negotiations, Kravis’s patience paid off. The board, exhausted and under immense pressure, chose their bid. Celebrations were muted as the realization of the work ahead dawned on Kravis and his team.

Johnson, gracious in defeat, focused on moving forward, while Shearson and Salomon reflected on the intense battle. The outcome reshaped Wall Street, highlighting the era’s excesses and the fierce competition that defined the financial world.

Wall Street Showdown: Kravis Triumphs in High-Stakes Bidding Battle

Ross Johnson, CEO of RJR Nabisco, considered a leveraged buyout of his company despite the potential risks involved. As a mid-level manager, he had risen through the ranks with a mix of charisma and strategic cunning. His dynamic approach clashed with Nabisco's conservative culture, but he managed to implement significant changes and successfully navigate corporate battles. 

Johnson was known for his bold moves, lavish spending and celebrity friendships. His decision to attempt the largest leveraged buyout in history would either cement his legacy or lead to dramatic consequences.

RJR Nabisco was the lifeblood of Winston-Salem, North Carolina. The company had a significant influence on the city and was a major player in the tobacco industry. The rise of health concerns about smoking in the 1960s led the company to diversify into the food business. 

In the 1980s, the company underwent a significant transformation with the merger with Nabisco Brands, headed by Ross Johnson. The merger was supposed to create a consumer-goods superpower, but the cultural clash within the company and Johnson's aggressive management style led to a lot of internal strife.

Johnson's tenure at RJR Nabisco was marked by constant restructuring and a penchant for grandiose ideas, many of which, like the development of the smokeless cigarette Premier, were met with skepticism. As the stock market crashed in 1987, Johnson considered a leveraged buyout as a possible solution to the company’s woes. His decision led to a frenzy in the financial world and set the stage for the largest corporate takeover in history.

Meanwhile, Henry Kravis, a financial titan who had swiftly risen in the world of leveraged buyouts, was also interested in RJR Nabisco. His journey from a boy navigating Tulsa's streets to the pinnacle of Wall Street power was marked by a relentless pursuit of success, often at the cost of personal and professional relationships. Kravis's aggressive approach to buyouts led to significant successes and redefined the landscape of corporate America. When he heard about Johnson’s plans for a leveraged buyout, he felt betrayed and determined not to let Johnson steal the company.

Theodore J. Forstmann, head of another leveraged buyout firm, Forstmann Little & Co., harbored deep resentment towards Henry Kravis. He viewed Kravis's extensive use of junk bonds in leveraged buyouts as financially irresponsible and damaging to the economy. When he read about KKR's bid for RJR Nabisco, he saw it as another reckless move and decided to take a stand against Kravis and his methods. His bid was a mission to expose Kravis's practices and save Wall Street from its excesses.

The battle for RJR Nabisco brought these tensions to a head. It was a high-stakes game involving complex negotiations, deep-seated rivalries, and personal vendettas. The pursuit of RJR Nabisco was not just a financial battle but a clash of egos, personal vendettas, and strategic missteps. The story of this takeover bid is a testament to the high-stakes world of corporate America, where billions of dollars and reputations hang in the balance.

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Barbarians at the Gate: The Fall of RJR Nabisco

Bryan Burrough

Ever wondered what it takes to stage the most audacious corporate takeover in history?

How did Ross Johnson rise from being a mid-level manager to the CEO of RJR Nabisco, and what led him to consider a leveraged buyout despite potential disasters?

What made Henry Kravis of KKR a formidable opponent in this high-stakes game?

Dive into this riveting tale of ambition, power, and the ruthless depths of corporate takeovers that reshaped America's financial landscape.

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