LeBow Begins Proxy Fight at RJR Nabisco to Force Breakup

NEW YORK —  Investor Bennett LeBow on Tuesday formally began seeking the support of shareholders of RJR Nabisco Holdings Corp. for his attempt to force an immediate breakup of the food and tobacco company.

But RJR called the proxy fight a ploy by LeBow and his ally Carl Icahn to gain control, force RJR to buy the tobacco company LeBow controls and generate a huge profit for themselves at RJR shareholders’ expense.

“These men are trying to embarrass this company with a nonbinding shareholder vote now, and then offer their own handpicked slate of directors to take control of the company by spring,” RJR Chief Executive Steven Goldstone said in a statement.

LeBow and Icahn, who control about 4.8% of RJR stock, have been pushing RJR for months to commit to an immediate spinoff of the 80.5% stake it owns in the Nabisco food business to RJR shareholders.

RJR sold 19.5% of Nabisco, the maker of Ritz crackers, Oreo cookies and Snackwells treats, to the public a year ago.

But RJR, which also makes Winston and Camel cigarettes, has resisted an immediate spinoff of its food business, saying the litigious climate for tobacco companies means such an effort would probably be challenged and delayed by lawsuits.

But Goldstone has indicated that he expects the climate to improve so RJR could consider such a spinoff in late 1997 or ’98.

LeBow’s Brooke Group Ltd. obtained regulatory clearance late last week to proceed with the consent solicitation. It is also seeking shareholder support for a bylaw change that suspended the right of shareholders to call special meetings.

As previously announced, LeBow requested that Jan. 12 be picked as the date for determining shareholder eligibility for the solicitation.

RJR has final say on setting the date, however.

RJR, which was taken private in the biggest corporate takeover on record--$25 billion in 1989--went public again two years later.

LeBow said that since then, it has been “the single worst tobacco stock, grossly under-performing all other tobacco companies and the overall market.”

He said an immediate spinoff of Nabisco would boost the value of stock held by RJR shareholders to $40 a share. In late trading on the New York Stock Exchange, RJR was up 12.5 cents at $30.875 a share.

Also on the NYSE, Nabisco was down 75 cents at $31.875 and Brook Group was off 37.5 cents at $8.625.

LeBow also announced that he has hired the investment firm Jefferies & Co. as an advisor on the consent solicitation.

RJR has contended all along that LeBow wants to gain control of the nation’s second-biggest tobacco company as a way to realize a profit by combining it with Brooke’s Liggett Group, which makes mostly private-label cigarettes.

RJR sued LeBow and Icahn in November, saying they violated securities laws by forming a group to take control of RJR.

Goldstone said in Tuesday’s statement that LeBow and Icahn “have a track record of extracting exorbitant sums from companies they’ve targeted” and estimated that LeBow “stands to reap a $1-billion profit if he can unload Liggett on RJR Nabisco.”

Goldstone also said RJR won’t pay “greenmail” to buy out LeBow and Icahn, and LeBow has said he won’t accept greenmail to go away.

Greenmail is a term used to describe payments in excess of the market price that companies once paid to selected investors for their stakes.