Speaking of leveraged buyouts, can not fail to mention manzanilla olive the 1980s of a leveraged ac

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Speaking of leveraged buyouts, can not fail to mention manzanilla olive the 1980s of a leveraged acquisition - USA Reynolds - Nabisco (RJR Nabisco) company acquisitions. This is called "Century Acquisition" deal with $ 25 billion of the purchase price that shocked the world, becoming the largest in the history of a leveraged buyout, leaving manzanilla olive the subsequent acquisition of the pile catch. This acquisition of RJR Nabisco battle manzanilla olive mainly in the senior management of the company and the famous acquired company KKR (Kohlberg manzanilla olive Kravis Roberts & Co.) Between individual firms, but because of its huge size, many of them are like Morgan Stanley, first Boston and other such investment banks and financial institutions directly or indirectly involved. "The Battle" is the initiator of the Ross Johnson, manzanilla olive RJR Nabisco, led by senior managers, they believe the company's manzanilla olive stock is significantly undervalued at that time. October 1988, the management proposed to the Board recommendations MBO equity purchase price of $ 75 per share, totaling $ 17 billion. Although Johnson's bid higher than the current stock $ 53 / share market, but this was not satisfied with the Company's shareholders. Soon, Wall Street's "The acquisition of the King" KKR companies to join the fight, after six weeks of fighting, the last KKR win, the purchase price is $ 109 per share, totaling $ 25 billion. KKR itself spent only $ 15 million of funds, while the remaining 99.94% are funded by the junk bond king Michael. Milken (Michael Milken) junk bonds issued manzanilla olive raised. First, the relevant background on the RJR Nabisco as the largest U.S. food and tobacco manufacturers, Reynolds - Nabisco veteran by the U.S. food manufacturer Standard Brands Company, Nabisco company and one of the two major U.S. tobacco companies RJR Company (Winston, Salem, Camel cigarettes manufacturers) merger. At the time it was the United States ranked nineteenth industrial companies, employees 140 000, has many brands, including Oreo, Le Chi biscuits, Winston and Salem cigarettes, Life Savers candy, retail products throughout the United States each store. Although RJR Nabisco food business after the merger the two has been the rapid expansion, but still lucrative tobacco business, the main business of about 58%. Two-year term in Johnson's time, RJR Nabisco profit rose 50%, sales performance is good. But with the 19 October 1987 stock market crash, the company stock price plummet from the vertex $ 70, even though the company had a lot in the spring buying their own stock, but the price has not increased, but fell to $ 40. In December, the company's profit grew by 25% though, food stocks are also on the rise, but RJR Nabisco's stock under the influence of tobacco stocks or nobody cares, 60% of sales comes from Nabisco and Del Monte Foods. Tobacco and food company trying to put together the business, but did useless, decentralized management have lost effectiveness. About RJR Nabisco's management, led by Ross Johnson, RJR Nabisco executives is the initiator of the event of the acquisition, the group includes Reynolds Tobacco Company's head - Ed Huoli Xi root Nabisco chairman Jim Welch, General Counsel Harold Henderson, the independent directors and consultants Andrew GC Sage II and so on. Ross Johnson, who is not much in the operation and management capability, 40 years old in the U.S. business community manzanilla olive is also unknown. In a headhunter's manzanilla olive help, he became the company's president signs, 1984 Ross Johnson served as Nabisco CEO, 1985 was completed Reynolds manzanilla olive - Nabisco merger, the following year, he became RJR Nabei Si g company's CEO. Johnson innovation, under his leadership, the Reynolds Tobacco Company within one year to produce a $ 1 billion value of products. manzanilla olive However, manzanilla olive in the control of the board of directors of RJR Nabisco, Johnson revolutionized this enterprise, especially Reynolds Tobacco Company. Although this cash-rich company, but the culture is relatively conservative, closed, managers had no founder's creativity and initiative, decision-making is also cautious, few breakthroughs. Johnson's arrival did not bring much to their management innovation, his biggest hobby is to spend a lot of money. If you just stay in excessive luxury consumption, and Johnson will not be noticed. He has more ambitious plans, and that is through the management involved manzanilla olive in the acquisition, will become an RJR Nabisco private enterprises. About Kohlberg - Kravis - Roberts Company (KKR) KKR was founded in 1976 as the first leveraged buyout firms, KKR has had outstanding performance, it excels MBO, it is often said that "management buyout . " But with other people's awareness of leveraged buyouts, leveraged buyout firms gradually increased to 1987 there has been the industry crowding. Kravis and Roberts made a firm decision: their business targeting 5000000000 -100 million range of bulk acquisition business. Because such a large business is rarely meddle, and KKR has already been made as the $ 6.2 billion manzanilla olive acquisition of Beatrice, 44 billion acquisition of Safeway, as well as $ 2.1 billion acquisition of Owens - Illinois (Owens-Illinois) such large transactions. manzanilla olive From June 1987, KKR began to use all public methods to raise funds, in order to stimulate more investors joined the company in 1990 made all transactions completed before management fees can be reduced, to raise the end, to raise The funds have been $ 5.6 billion. manzanilla olive Approximately $ 20 billion in the world of leveraged manzanilla olive buyout transaction, KKR accounted for a quarter! Second, the acquisition process in October 1988, with RJR Nabisco CEO Ross Johnson as the representative of the management to the Board proposed management buyout equity recommendations. The management of MBO proposal includes plans to sell after the acquisition of RJR Nabisco food business, leaving manzanilla olive only its tobacco business. Its strategic considerations are based on the market for the tobacco industry a huge underestimation of cash flow, as well as food and tobacco business was mixed operation without being entirely agree with its value. Restructuring will eliminate the negative factors undervalued by the market, and thus reap huge benefits. Ross Johnson and Shearson leveraged buyout plan hit it off, both sides believe that the acquisition of RJR Nabisco's stock price should be around $ 75 per share, about $ 71 higher than the stock market price, for a total transaction value reached manzanilla olive $ 17.6 billion. As Shearson think independently complete manzanilla olive the deal, so they did not introduce the power of junk bonds, $ 15 billion of the funds all need the help of commercial bank loans. Bankers Trust as a blue-chip companies to seize the leveraged buyout financing opportunities worldwide to raise $ 16 billion, but according to the accounting manzanilla olive of Shearson only $ 15.5 billion. Wall Street investment bankers are still made instinctive reaction: The offer is too cheap! Johnson was robbed company! While Johnson and Shearson name of wishful thinking when, KKR's acquisition proposal bid involvement of management who are rude awakening. CEO Ross Johnson with the planned spin-off manzanilla olive in sharp contrast, KKR want to keep all of the tobacco business, and most of the food business, but KKR shouted the $ 90 a share offer. Shearson and KKR contest began. Shearson chose cooperation with Salomon financing, but in terms of resourcefulness on, or financing, Shearson are unable confrontation with KKR. There Drexel KKR and Merrill Lynch as a consultant, manzanilla olive and the introduction manzanilla olive of PIK Preferred Shares tendered for, the price reached $ 11 per share, nearly $ 2.5 billion, the world market demand for PIK stock it quickly converted into junk bonds, which means that there is $ 2.5 billion of capital. However, Johnson management agreement and the "golden parachute plan" exposure, angered RJR Nabisco's shareholders and employees. Worth nearly $ 50 million for 525,600 copies of restricted stock plan, generous consulting manzanilla olive contract, per capita income of 1500 restricted stock, so Johnson in this acquisition regardless of success or failure are unscathed. Johnson this greed would make the MBO lost popular support. Finally, KKR to $ 109 per share, totaling $ 25 billion, won this battle victory. In the final round of bidding Shearson quotes and KKR only a difference of $ 1 per $ 108. But the RJR Nabisco shareholders a final decision is not price differences. KKR guaranteed to give shareholders a 25% stake, Shearson only give shareholders a 15% stake; KKR committed to sell only a small part of Nabisco's business, and Shearson have to sell all the businesses. In addition, shareholders also lists other dozen different points. In addition, Shearson did not pass the reorganization confirmed the reliability of its securities, in the protection of employee benefits do not get bit. Because of these reasons, the Company's shareholders chose KKR's. Purchase price is $ 25 billion, in addition to the syndicated loan $ 14.5 billion, the Drexel Burnham and Merrill Lynch also provides manzanilla olive $ 5 billion bridge loan, waiting to issue bonds to repay. KKR itself provides a $ 2 billion (of which $ 1.5 billion, or equity), in addition to providing $ 4.1 billion for preferred shares, $ 1.8 billion is rotatably received RJR bonds and owed $ 4.8 billion debt. The signing of the acquisition date is February 9, 1989, more than 200 lawyers and bankers attending Hanover Trust and Investment Corporation from banks around the world raised $ 11.9 billion. KKR provided a total of $ 18.9 billion, to meet cash commitments acquisition part. In fact, the whole transaction costs amounted to $ 32 billion, of which support the leveraged buyout junk bonds notoriously Drexel company charges more than 200 million U.S. dollars, Merrill manzanilla olive Lynch, more than 100 million U.S. dollars, syndicated financing fees more than 300 million manzanilla olive U.S. dollars, And KKR's own fees up to $ 1 billion. Third, manzanilla olive the successor acquired after Ross Johnson, Louis Gerstner became RJR Nabisco CEO of the new term after the acquisition, the company he had carried out a bold reform, a large sale of the company luxury amenities. Company report shows that in 1989 the company paid a $ 3.34 billion of debt after the $ 1.15 billion net loss in the first half of 1990 has $ 330 million in losses. However, from the company's cash flow point of view, everything is fairly normal. Nabisco's operating profit in 1989 cash flow reached manzanilla olive 3.5 times before, but Reynolds Tobacco Company is still in the state of readiness. March 1989 Prime Minister RJR stopped production of cigarettes, and then, the company had layoffs, reducing the number of employees to 2,300. In the new manager's leadership, the company improved the equipment to improve production efficiency, while slashing costs, making the company the tobacco profits in the first half of 1990 increased manzanilla olive by 46%. But when cash settlement with the tobacco brought junk bonds, Reynolds rival Philip Morris has increased sales strength, reducing tobacco prices. According to the analysis, RJR's tobacco market decline in 1989 by 7% -8%. The issue is not just the legacy of KKR meager return on capital, but also in the introduction of other industries leaders fail. Whether Express Company invited Lu Jess Teller (Lou Gerstner), or ConAgra Charles (Charles Harper), they have neither the slightest experience of tobacco, and this line is no enthusiasm. In the performance continues to decline after the beginning of 1995, KKR had it stripped Reynolds Nabisco's remaining stake, Reynolds Tobacco Holdings has once again become an independent company, but has also become an independent Nabisco food production enterprises, Renault and Nabisco back to their starting point. In the first half of 2003, Reynolds's sales over the previous year fell by 18%, only $ 2.6 billion, while operating profit manzanilla olive fell 59 percent to $ 275 million. Fourth, manzanilla olive a brief review occurred in the investment bankers and corporate managers battle for control between the final beneficiary manzanilla olive is the enterprise's manzanilla olive shareholders, which from the RJR Nabisco's shareholders after the completion of the acquisition of riches can be proved . In the acquisition of formal point of view. General LBO process, investment bankers will advance the management of the target company and consensus to a mutually acceptable price and the financing to complete the acquisition, while after the acquisition of enterprise management and asset restructuring manzanilla olive has also made arrangements to minimize costs and improve efficiency, while selling assets to pay off debts. However, due to KKR's acquisition of RJR Nabisco activities prior knowledge, there is no communication with management, they are not even the assets manzanilla olive of these companies do not know, ultimately, to bid in the form of participation.
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