Barbarians at the Gate: The Fall of RJR Nabisco

Johnson began to display cracks in his “sunny façade” as he attempted to identify what went wrong in the situation with Kravis (244). In Cohen’s view, the problem was that every single firm Kravis hired (Morgan Stanley, Drexel, and Wasserstein Perella) “had its own reasons to want Shearson’s big deal crushed” (244). For example, Morgan Stanley considered Shearson’s bid on RJR Nabisco “a challenge to its own growing power in the LBO market” (245). For Shearson to stay in the fight, the firm would have to top Kravis’s $90 per share. However, Kravis’s bid was $79 per share in cash and $11 per share in securities, meaning he only topped the cash component of Shearson’s offer by $4 per share. Johnson’s lawyer Steve Goldstone told Johnson that his interests did not necessarily match those of Shearson, thus not everything was lost. Still, “for Johnson, the whole thing had become a bad dream” (245). The added debt from a $90 share price would translate into big cuts, including Johnson’s beloved corporate jets.

Meanwhile, The Wall Street Journal ran headlines like “Offers for RJR Pit KKR and Shearson in a Battle for Turf” (251). Cohen and Kravis met to seek an amicable resolution to the RJR Nabisco situation.