RJR Nabisco's CEO announced a bid to take the tobacco and food conglomerate private at $75 a share, a move meant to enrich management but which instead triggered a bidding war with the leveraged-buyout firm Kohlberg Kravis Roberts. The ensuing contest, eventually won by KKR for roughly $25 billion, became the largest takeover in history at the time and a symbol of Wall Street excess later chronicled in the book and film 'Barbarians at the Gate.'
Johnson's original plan was audacious even by 1980s standards: he and a small circle of executives, working with Shearson Lehman Hutton, sought to buy the company themselves and reap enormous personal profits, a maneuver critics viewed as a betrayal of shareholders and employees. He reportedly designed a management compensation package so lucrative that it became a rallying cry for critics of corporate greed.
Henry Kravis and KKR, feeling snubbed at being left out of the initial deal, entered the fray and drove the price into a bidding frenzy that captivated Wall Street for weeks. The final price of about $25 billion dwarfed any previous corporate acquisition and required unprecedented junk-bond financing arranged by Drexel Burnham Lambert.
The saga, later immortalized in the bestselling book 'Barbarians at the Gate,' became shorthand for the decade's excesses—corporate jets, golden parachutes, and executives more focused on personal enrichment than the companies they ran. RJR Nabisco itself struggled under the mountain of debt from the deal for years afterward, and the takeover remains a textbook case study in business school courses on leveraged buyouts and corporate governance.
Key people: F. Ross Johnson, Henry Kravis