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Merger Approved; RJR Nabisco Will Move Headquarters To New York Area

April 27, 1989

ATLANTA (AP) _ RJR Nabisco Inc. will move its headquarters to the metropolitan New York area from Atlanta, the food and tobacco giant announced Thursday, shortly after shareholders approved the record $24.53 billion buyout of the company by Kohlberg Kravis Roberts & Co.

RJR Nabisco said its new chairman, Louis Gerstner Jr., sent a letter to employees saying the plans of the firm can ″best be achieved by maintaining close ongoing contact with the investment banking community and other New York-based segments of the business community.″

The letter said relocations could begin by early summer and would be completed by the end of the year. Some existing corporate functions may be reassigned to RJR Nabisco’s operating companies, the letter said.

The company will decide over the next few weeks whether layoffs are necessary, said Pauline Howes, an RJR Nabisco spokeswoman.

″We are in the process of looking at staffing needs,″ she said, adding, ″There might be some functions and positions that might not remain with the company.″

There are about 450 RJR Nabisco employees in Atlanta, Ms. Howes said.

The move would be the second for RJR Nabisco corporate headquarters in recent years. Former RJR President F. Ross Johnson moved the headquarters from Winston-Salem to Atlanta after he took over following the merger of R.J. Reynolds Industries Inc. and Nabisco Brands Inc. in 1985.

After Gerstner, a former American Express executive, was named to head RJR Nabisco, it was speculated he would move the company’s headquarters to the New York area. Gerstner lives in Connecticut, near New York City.

The exact location of RJR Nabisco’s headquarters was not announced. However, the firm’s Nabisco Brands division is based in New Jersey, also near New York.

Earlier Thursday, RJR Nabisco shareholders formally approved the buyout by Kohlberg Kravis at a special meeting in Wilmington, Del.

Company officials said about 85 percent of RJR Nabisco’s shares were voted in favor of the merger, which will take effect Friday. At that time, trading of RJR Nabisco stock will cease on the New York Stock Exchange.

Shareholders who tendered their stock to Kohlberg Kravis will receive cash and securities valued by the company at $109 per share.

Gerstner was questioned by one shareholder about the future of the company’s Del Monte Foods subsidiary, which is thought to be a prime candidate to be sold to help ease the debt associated with the takeover.

Gerstner replied, ″It’s a terrific company. I know there are rumors and speculation that Del Monte will be sold under the financing plan, but I cannot comment except to say that it is speculation.″

Also Thursday, Swiss Bank Corp. and the Swiss branch of J.P. Morgan Securities Ltd. said they had reached agreement with RJR Nabisco on measures to protect holders of bond issues the companies separately managed.

After Kohlberg Kravis launched its buyout of RJR Nabisco, Swiss Bank Corp. and J.P. Morgan sought assurances that the takeover would not result in losses to bondholders.

The issue arose from provisions in the bond issues which allowed them to be called if RJR Nabisco was reorganized.

Under Thursday’s agreements, RJR will obtain a legal ruling on whether the planned buyout represents a reorganization of the company’s structure under the terms of the bond issue, a Swiss Bank Corp. statement said.

If the buyout is found to represent a reorganization, lead managers - including Swiss Bank Corp. and J.P. Morgan - may call in the bonds if they feel holders are insufficiently protected, the bank said.

Under the agreement, RJR promised to issue letters of credit by May 29 guaranteeing the bonds, and will maintain the letters of credit until the Swiss courts decide the issue of reorganization, a J.P. Morgan statement said.

Swiss Bank Corp. agreed to drop a lawsuit against RJR filed in a Swiss court last month.

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