April 18, 2013

'Barbarians at the Gate - The Fall of RJR Nabisco': Classic Movie on the Nabisco Takeover


Barbarians at the Gate: The Fall of RJR Nabisco (ISBN 0-060-16172-8) is a 1990 book about the leveraged buyout (LBO) of RJR Nabisco, written by investigative journalists Bryan Burrough and John Helyar. The book is based upon a series of articles written by the authors for The Wall Street Journal. The book was later made into a made-for-TV movie by HBO, also called Barbarians at the Gate. The book centers on F. Ross Johnson, the CEO of RJR Nabisco, who planned to buy out the rest of the Nabisco shareholders.

The opposition to Johnson's bid for the company is one of the pioneers of the leveraged buyout, Henry Kravis and his cousin George R. Roberts. Kravis was the first person Johnson talked to about doing the LBO, and feels betrayed after learning that Johnson wants to do the deal with another firm, American Express's former Shearson Lehman Hutton division. Ted Forstmann and his Forstmann Little buyout firm also played a prominent role.

After Kravis and Johnson are unable to reconcile their differences, a bidding war takes place which Johnson will eventually lose. The unfortunate side effect of the augmented buyout price to the shareholders is the creation of a worrying level of debt for the company.