RJR Nabisco Final Ppt

RJR Nabisco

RJR NABISCO

AGENDA
Historical Perspective
LBO Candidate
Special Committee
Key Players
Valuations
Risk Factors
Post LBO Plans
Final Takeover

Historical Perspective
Started in 1875 as a tobacco firm.
In 1967 , RJR entered in food, restaurant,

alcohol and shipping business.
In 1987:

- Food Business: $9.4 billion
- Tobacco Business: $ 7 billion

LBO Candidate
Operating under low debt
Exhibited long term and non cyclical growth
RJR’s break up value:
Nabisco

$8 to $9.5 billion

Del Monte

$3 to $ 4 billion

Planters

$1.5 to $ 2 billion

Total

$12.5 t0 15.5 billion

Historical
Perspective

LBO
Candidate

Special
Committe
e

Key
Players

Valuation

Risk
Factors

Post LBO
Plans

Final
Takeover

Special Committee
No sale of any assets of RJR Nabisco.
Shareholders should get a “substantial

common-stock related interest”.
Include details on financing arrangements.
Approved by bidding firm’s board of

directors.
Historical
Perspective

LBO
Candidate

Special
Committe
e

Key
Players

Valuation

Risk
Factors

Post LBO
Plans

Final
Takeover

Key Players
Management Group
KKR Group
First Boston Corporation
Forstmann, Little & Co.

Historical
Perspective

LBO
Candidate

Special
Committe
e

Key
Players

Valuation

Risk
Factors

Post LBO
Plans

Final
Takeover

Valuation
RJR NABISCO- Pre Bid Valuation
Assumptions:
 Adjusted Beta -0.78
 D/E Ratio-0.71
 Tax-0.35
 Unlevered Beta-0.53
 Risk-free rate-9%
 Market risk premium5.9%
 Cost of Equity-12.15%
 Growth Rate-3.00%
 Number of Shares outstanding-$247.40 million
Historical
Perspective

LBO
Candidate

Special
Committe
e

Results:
 Intrinsic Value$116.43
 PV of Cash flows$27,693 million.
 PV of Interest Tax
Shield-$1124.77
million
 Total Firm Value$28,804.10 million

APV

Key
Players

Valuation

Risk
Factors

Post LBO
Plans

Final
Takeover

Valuation
Management Group-Post Merger Valuation
Assumptions:
 Adjusted Beta -1.09
 D/E Ratio-0.86
 Tax-0.35
 Unlevered Beta-0.69
