Icahn Dumps Rjr Nabisco Stake Famed Financier Scraps Takeover Attempt, Pockets Profits Totaling About $130 Million
Financier Carl Icahn has sold his entire stake in RJR Nabisco, saying a runup in tobacco stock prices had dimmed chances he could win control of the RJR board and force a speedy spinoff of its food business.
By selling the stock after it gained 35 percent since last fall, the one-time corporate raider appears to have made $130 million before expenses. He had invested $600 million in the company less than 1-1/2 years ago.
On the news of the sale, RJR shares fell 3 percent Thursday on the New York Stock Exchange, dropping $1.12-1/2 to close at $36.62-1/2 a share.
Even as he announced the deal, Icahn left the door open to resuming a proxy fight for control of RJR sometime in the future, especially if its stock price should turn lower.
But analysts doubted he would be back at RJR’s door. “He made himself a ton of money over a relatively short time frame,” said Emanuel Goldman, who follows tobacco stocks for PaineWebber.
The analysts said Icahn realized he had no chance of winning the proxy fight for control of the RJR board at the April shareholder’s meeting. The stock price is up sharply, its operating divisions are showing improvement and top management appears willing to discuss a settlement of tobacco lawsuits.
David Adelman, tobacco industry analyst for Dean Witter, said large shareholders saw no reason to change leadership under such conditions.
RJR makes Winston and Camel cigarettes while its majority-owned Nabisco unit makes Oreo cookies and Ritz crackers. While efforts lately have been aimed at splitting the business, RJR made takeover history in 1989 when it was taken private in a record $25 billion deal.
RJR stock was trading at about $28 a share in the fall of 1996 when Icahn indicated he would nominate candidates to replace the RJR board and move quickly to spin off the company’s 80.5 percent stake in the Nabisco food business to RJR shareholders. He said the businesses would be worth more if they were entirely separate.
Icahn said Thursday he had sold 19.9 million shares of RJR stock after the market had closed Wednesday for $36.75 per share less commissions or about $731 million. He said he bought the stock for an average of $30 a share - or about $597 million.
The sale represented Icahn’s entire stake in RJR. He has been RJR’s biggest shareholder with about 7.3 percent of total shares outstanding.
Icahn said the “recent euphoria” about a tobacco litigation settlement and the rise in tobacco stock prices led him to conclude it would be “exceedingly difficult at this time” to win the proxy contest.
He said, in documents filed with the Securities and Exchange Commission, that “large institutional stockholders are currently satisfied with the status quo.” But he said he was not satisfied and doubted that the current RJR board would ever spin off the food business.
Asked for comment on Icahn’s moves, RJR spokeswoman Carol Makovich said, “Mr. Icahn has not been the focus of this company’s management.”
“We have been focused on running and strengthening our tobacco and food business to deliver shareholder value. We intend to keep doing just that,” she said.