Pursuant to Rule 424(b)(3)
Reg. No. 33-58109
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 20, 1995
111,047,229 SHARES
RJR NABISCO HOLDINGS CORP.
[RJR NABISCO LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
All of the 111,047,229 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of RJR Nabisco Holdings Corp., a Delaware corporation
("Holdings" or the "Company"), are being offered by Borden, Inc., a New Jersey
corporation (the "Selling Stockholder" or "Borden"). The Selling Stockholder is
offering all of the shares of Common Stock it owns and upon completion of this
offering will no longer be a holder of any Common Stock. See "Selling
Stockholder."
The Company will not receive any proceeds from the sale of the Common Stock.
SEE "SIGNIFICANT CONSIDERATIONS" FOR A DISCUSSION OF THE IMPACT ON HOLDERS
OF COMMON STOCK OF CERTAIN POTENTIAL TRANSACTIONS AND OTHER IMPORTANT
CONSIDERATIONS.
The Common Stock is listed on the New York Stock Exchange under the symbol
"RN." The reported last sale price of the Company's Common Stock on the New York
Stock Exchange on March 20, 1995 was $5.75 per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The shares of Common Stock offered hereby (the "Shares") will be purchased
from the Selling Stockholder by Goldman, Sachs & Co. as the Underwriter at a
price of $5.75 per share, less a commission of $0.2175 per share ($614,368,794
aggregate net proceeds to the Selling Stockholder). The Company will pay certain
expenses of the offering estimated at approximately $480,000.
The Shares may be offered by the Underwriter from time to time in one or
more transactions (which may involve block transactions) on the New York Stock
Exchange or on other national securities exchanges on which the Common Stock is
traded, in the over-the-counter market, through negotiated transactions or
otherwise at market prices prevailing at the time of the sale or at prices
otherwise negotiated, subject to prior sale, when, as and if delivered to and
accepted by the Underwriter. See "Plan of Distribution" herein.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
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The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriter and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriter. It is expected that the
shares of Common Stock will be ready for delivery in New York, New York on or
about March 27, 1995.
GOLDMAN, SACHS & CO.
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The date of this Prospectus Supplement is March 20, 1995.
<PAGE>
SIGNIFICANT CONSIDERATIONS
Prospective investors should carefully consider the following factors in
connection with their decision to invest in Common Stock.
TOBACCO-RELATED CONSIDERATIONS
GENERAL. R.J. Reynolds Tobacco Company ("RJRT"), an operating subsidiary of
Holdings owned through RJR Nabisco, Inc. ("RJRN"), is the second largest
cigarette manufacturer in the United States, and in the year ended December 31,
1994, RJRT's domestic tobacco business comprised approximately 30% of Holdings'
net sales and approximately 46% of Holdings' operating income from continuing
operations before amortization of trademarks and goodwill. Domestic cigarette
industry retail unit sales have declined in the last four calendar years at an
average rate of approximately 1.9% per year. Holdings believes that the decline
is due to a number of factors, including excise tax increases, asserted adverse
health effects of smoking, diminishing social acceptance of smoking and
governmental and private restrictions on smoking. For many years, the
advertising, sale and use of cigarettes has been under attack by government and
health officials in the United States and in other countries, principally due to
claims that cigarette smoking is harmful to health. This attack has resulted in
a number of substantial restrictions on the marketing, advertising and use of
cigarettes, diminishing social acceptability of smoking and activities by anti-
smoking groups designed to inhibit cigarette sales, the form and content of
cigarette advertising and the testing and introduction of new cigarette
products. Together with manufacturers' price increases in recent years and
substantial increases in state and federal excise taxes on cigarettes, this
attack has had and will likely continue to have an adverse effect on cigarette
sales.
POSSIBLE LEGISLATIVE AND REGULATORY ACTIVITIES. During the last Congress,
the Clinton Administration and federal legislators introduced bills that would
have significantly increased the federal excise tax on cigarettes, eliminated
the income tax deductibility of a portion of the cost of tobacco advertising,
banned smoking in public buildings and workplaces, added additional health
warnings on cigarette packaging and advertising, further restricted the
marketing of tobacco products and authorized the Attorney General of the United
States to seek to recover federal Medicaid and Medicare payments used to treat
illnesses allegedly related to the use of tobacco products from their
manufacturers. This legislation was not enacted.
In January 1993, the U.S. Environmental Protection Agency released a report
on the respiratory effects of environmental tobacco smoke ("ETS") which
concludes that ETS is a known human lung carcinogen in adults and in children
causes increased respiratory tract disease and middle ear disorders and
increases the severity and frequency of asthma. In March 1994, the U.S.
Occupational Safety and Health Administration ("OSHA") announced proposed
regulations that would restrict smoking in the workplace to designated smoking
rooms that are separately exhausted to the outside. Although RJRT cannot predict
the form of any regulations that may be finally adopted by OSHA, if the proposed
regulations are adopted, RJRT expects that many employers who have not already
done so would prohibit smoking in the workplace rather than make expenditures
necessary to establish designated smoking areas to accommodate smokers. Because
many employers currently do not permit smoking in the workplace, RJRT cannot
predict the effect of any regulations that may be adopted, but incremental
restrictions on smokers could have an adverse effect on cigarette sales and
RJRT.
In February 1994, the Commissioner of the U.S. Food and Drug Administration
(the "FDA"), which historically has refrained from asserting jurisdiction over
cigarette products, stated that he intended to cause the FDA to work with the
U.S. Congress to resolve the regulatory status of cigarettes under the Food,
Drug and Cosmetic Act. During the second quarter of 1994, hearings were held in
this regard, and RJRT and other members of the United States cigarette industry
were asked to provide voluntarily certain documents and other information to
Congress. RJRT is unable
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to predict the outcome of any Congressional deliberations or the likelihood that
the FDA will assert jurisdiction over cigarettes in some manner. Were the FDA to
assert jurisdiction in a manner that materially restricts the availability of
cigarettes to consumers, it would likely have a significant adverse effect on
RJRT.
It is not possible to determine what additional federal, state, local or
foreign legislation or regulations relating to smoking or cigarettes will be
enacted or to predict any resulting effect thereof on RJRT, R.J. Reynolds
Tobacco International, Inc., another operating subsidiary of Holdings owned
through RJRN ("Tobacco International"), or the cigarette industry generally, but
such legislation or regulations could have an adverse effect on RJRT, Tobacco
International or the cigarette industry generally.
TOBACCO-RELATED LITIGATION. Various legal actions, proceedings and claims
are pending or may be instituted against RJRT or its affiliates or indemnitees,
including those claiming that lung cancer and other diseases have resulted from
the use of or exposure to RJRT's tobacco products. The plaintiffs in these
actions seek recovery on a variety of legal theories, including strict liability
in tort, design defect, negligence, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices, conspiracy, unjust enrichment,
indemnity and common law public nuisance. Seven of these cases purport to be
class actions brought on behalf of thousands of individuals. Purported classes
include individuals claiming to be addicted to cigarettes, flight attendants
alleging personal injury from exposure to ETS in their workplace and, in one
case, parents claiming that an RJRT advertising campaign constitutes an unfair
trade practice. In two such cases, Florida state court judges granted
plaintiffs' motions to certify a class. Defendants have appealed both of these
rulings to the Florida District Court of Appeals. In another such case, a United
States District Court judge has granted plaintiffs' motion to certify a class,
and defendants are seeking appellate review. In addition, four states, including
Florida, have sued RJRT (and in three cases, RJRN) and other industry members on
various theories to recoup expenses incurred by the states in the treatment of
diseases purportedly associated with cigarette smoking and to enjoin certain
marketing practices. For a discussion of the Florida statute under which the
state has brought its action, see Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 under "Business-- Tobacco--Legislation and
Other Matters Affecting the Cigarette Industry" and "--Litigation Affecting the
Cigarette Industry" incorporated herein by reference. Litigation is subject to
many uncertainties, and it is possible that some of the tobacco-related legal
actions, proceedings or claims could be decided against RJRT or its affiliates
or indemnitees. Determinations of liability or adverse rulings against other
cigarette manufacturers that are defendants in similar actions, even if such
rulings are not final, could adversely affect the litigation against RJRT or its
affiliates or indemnitees and increase the number of such claims. Although it is
impossible to predict the outcome of such events or their effect on RJRT, a
significant increase in litigation activities could have an adverse effect on
RJRT. RJRT believes that it has a number of valid defenses to any such actions,
and intends to defend vigorously all such actions. Holdings believes that the
ultimate outcome of all pending tobacco litigation matters should not have a
material adverse effect on the financial position of Holdings; however, it is
possible that the results of operations or cash flows of Holdings in particular
quarterly or annual periods or the financial condition of Holdings could be
materially affected by the ultimate outcome of certain pending litigation
matters.
For an additional discussion of legislation and litigation relating to the
cigarette industry and RJRT, see Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 under "Business--Tobacco--Legislation and
Other Matters Affecting the Cigarette Industry" and "--Litigation Affecting the
Cigarette Industry" incorporated herein by reference.
IMPACT OF COMPETITIVE ACTIVITY
RJRT's largest U.S. competitor announced competitive initiatives in April
1993 that ultimately resulted in significant changes in the U.S. cigarette
market. These competitive actions and
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responses by RJRT and other competitors effectively lowered the retail price of
full price cigarette brands and raised the price of the most highly discounted
brands in the second half of 1993. This resulted in a market with smaller price
differences between brands in different tiers.
The costs of responding to these competitive initiatives and the decrease in
list prices for full price cigarette brands of approximately 40 cents per pack
were primarily responsible for the sharp decline in RJRT's 1993 operating
company contribution because net price increases of approximately 12 cents per
pack (including the price increase referenced below) in the most highly
discounted brands did not and are not expected to offset the lower margins on
full price brands. Notwithstanding these lower margins, full price brands remain
more profitable than lower price brands, which consist of certain national
brands designed to have a lower price and of private label brands for retailers
and distributors. The private label brands are generally the least profitable of
RJRT's brands, but are important to facilitate RJRT's service to wholesale and
retail customers.
Although RJRT's full price volume as a percentage of total volume declined
to 56% in 1993 from 65% in 1992, lower retail prices on full price brands since
the third quarter of 1993 have resulted in an increase in full price volume as a
percentage of total volume to 60% in 1994. The higher mix of full price volume
occurred despite significantly reduced promotional expenses on full price brands
during this period.
During the fourth quarter of 1993, RJRT increased the list price of its
brands by 4 cents per pack, a move that its competitors generally matched. The
increases reflected an improvement in the stability of the competitive
environment that began in the fourth quarter of 1993. This improved stability
continued through 1994 and, together with operating cost reductions and
favorable product mix shifts, improved margins. However, 1994 profit margins
remain below first quarter 1993 levels and experienced some deterioration in the
last quarter of 1994 as a result of increases in marketing expenses to protect
and build market share. RJRT is unable to predict whether 1994's pricing
stability and profit margins are sustainable.
The effect of a law requiring U.S. manufacturers to use at least 75%
American-grown tobacco in their cigarettes produced after 1993 increased RJRT's
raw material costs for all brands, with a larger effect on costs for lower price
brands since these brands historically have contained a higher percentage of
lower cost foreign-grown tobacco than full price brands. The cost increase was
more than offset by higher revenues for lower price brands resulting from the
fourth quarter price increase referenced above. The same result occurred for
full price brands. In December 1994, Congress enacted legislation (the Uruguay
Round Agreements Act) to replace this domestic content requirement with a tariff
rate quota system that keys tariffs to import volumes. The tariff rate quotas
are currently being negotiated between the United States and overseas tobacco
producers. Domestic content requirements and tariff rate quotas increased raw
material costs slightly in 1994 and may do so again in the future. For
additional information, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Tobacco--1994 Governmental Activity" and
"Business--Tobacco--Competition" in Holdings' Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 incorporated herein by reference.
LEVERAGE AND DEBT SERVICE
Holdings, together with its subsidiaries, had, at December 31, 1994, a ratio
of consolidated total debt to total stockholders' equity of 1.0-to-1 without
giving effect to the initial public offering of shares of Nabisco Holdings Corp.
("Nabisco") and related transactions, which was consummated on January 26, 1995.
Although Holdings has significantly reduced its consolidated indebtedness
and improved its consolidated debt-to-equity ratios since the acquisition of
Holdings (the "Acquisition") by affiliates of Kohlberg Kravis Roberts & Co.,
L.P. ("KKR") in 1989, the indebtedness and debt-to-equity ratio of Holdings and
its subsidiaries continue to have the effect, generally, of restricting the
flexibility of
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Holdings and its subsidiaries in responding to changing business and economic
conditions insofar as they affect the financial condition and financing
requirements of Holdings and its subsidiaries. Moreover, the Credit Agreement
dated as of December 19, 1991 and the Credit Agreement dated as of April 5, 1993
and the terms governing certain other indebtedness (including indebtedness of
its subsidiaries) impose significant operating and financial restrictions on
Holdings and its subsidiaries. These restrictions limit the ability of Holdings
and its subsidiaries to incur indebtedness, pay dividends, engage in
transactions with stockholders and affiliates, create liens, sell or dispose of
certain assets and certain subsidiaries' stock and engage in certain mergers or
consolidations. See "Description of Capital Stock--Contractual Restrictions and
Policies on Payment of Dividends" in the Prospectus.
HOLDING COMPANY STRUCTURE
Holdings' cash flow and consequent ability to meet its obligations under its
indebtedness and to pay future dividends on the Common Stock are substantially
dependent upon the earnings and cash flow available after debt service of RJRN
and the availability of such earnings and cash flows to Holdings by way of
dividends, distributions, loans and other advances. The Common Stock is junior
in right of payment to all existing and future liabilities, obligations (whether
or not for borrowed money) and preferred stock of Holdings, and is structurally
subordinate to all existing and future liabilities and obligations (whether or
not for borrowed money) of RJRN and its subsidiaries. As of December 31, 1994,
total current liabilities and long-term debt of Holdings' subsidiaries were
approximately $14.4 billion.
TERMINATION OF KKR AFFILIATION
The Selling Stockholder is wholly owned by affiliates of KKR and received
the 111,047,229 shares of Common Stock offered hereby from such affiliates. The
shares of the Common Stock offered hereby represent approximately 8.15% (6.52%
on a fully diluted basis) of the outstanding shares of Common Stock as of March
16, 1995. After the sale of the shares of Common Stock offered hereby, the
Selling Stockholder will not own any shares of Common Stock and KKR and its
affiliates will own or control fewer than 0.1% of the outstanding shares of
Common Stock as of March 16, 1995. Currently, seven of Holdings' sixteen
directors are partners of KKR. None of the nominees for election to the
Company's Board of Directors at the Company's annual meeting in April 1995 is a
partner or executive of KKR.
SIGNIFICANT INCREASE IN SHARES AVAILABLE FOR TRADING
Of the 1,362,183,648 shares of Common Stock outstanding as of March 16,
1995, in excess of 1.2 billion shares are freely tradeable, including an
aggregate of 119,166,248 shares of Common Stock that were exchanged as of March
14, 1995 for shares of Common Stock of Borden ("Borden Common Stock") pursuant
to the merger of Borden with and into an affiliate of KKR. The entire
111,047,229 shares of Common Stock offered hereby will be freely tradeable.
After giving effect to such offering, substantially all of the outstanding
Common Stock will be freely tradeable.
Holdings is unable to predict the effect that the increase in freely
tradeable shares of Common Stock will have on the market value of such shares,
although such increase may cause temporary volatility or a decline in the market
price of the Common Stock unrelated to the operating performance of Holdings.
Holdings has indicated that, under normal circumstances, it does not plan to
issue additional equity securities for purposes of balance sheet improvement.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Purchase Agreement, the
Selling Stockholder has agreed to sell, and the Underwriter has agreed to
purchase, the Shares. Under the terms and conditions of the Purchase Agreement,
the Underwriter is committed to take and pay for all of the Shares being sold if
any are taken.
It is expected that all or a substantial portion of the Shares may be sold
by the Underwriter to institutional purchasers in one or more transactions
(which may involve block transactions) on the New York Stock Exchange or on
other national securities exchanges on which the Common Stock is traded or
otherwise. The distribution of the Shares may also be effected from time to time
in special offerings, exchange distributions and/or secondary distributions
pursuant to and in accordance with the rules of the New York Stock Exchange or
such other exchanges, in the over-the-counter market, in negotiated transactions
through the writing of options on Shares (whether such options are listed on an
options exchange or otherwise) or otherwise, or in a combination of such at
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling Shares to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the Underwriter and/or the purchasers of such Shares for whom they may act as
agent or to whom they may sell as principal.
In connection with the sale of the Shares, the Underwriter will receive
compensation from the Selling Stockholder in the form of a commission of $0.2175
per share, including selling concessions of $0.10, and may receive compensation
from purchasers of the Shares for whom it may act as agent or to whom it may
sell as principal in the form of commissions or discounts, in each case in
amounts which will not exceed those customary in the types of transactions
involved. Underwriters and dealers that participate in the distribution of the
Shares may be deemed to be underwriters, and any discounts received by them from
the Selling Stockholder and any compensation received by them on the resale of
the Shares by them may be deemed to be underwriting discounts and commission
under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Jo-Ann Ford, Senior Vice President, Law and Secretary of the Company,
and will be passed upon for the Underwriter by Davis Polk & Wardwell. Ms. Ford
owns and has options to purchase shares of Common Stock which represent less
than 0.1% of the currently outstanding shares of Common Stock. Davis Polk &
Wardwell has in the past provided, and may continue to provide, legal service to
the Company and its affiliates. A partner of Davis Polk & Wardwell is General
Counsel of the Company.
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PROSPECTUS
[RJR NABISCO LOGO] 111,047,229 SHARES
RJR NABISCO HOLDINGS CORP.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Borden, Inc. ("Borden" or the "Selling Stockholder") may offer from time to
time up to 111,047,229 shares of common stock, par value $.01 per share (the
"Common Stock" or the "Holdings Common Stock"), of RJR Nabisco Holdings Corp.
(the "Company" or "Holdings"). When an offering of all or part of the Common
Stock offered hereby is made, a supplement to this Prospectus (the "Prospectus
Supplement") will be delivered with this Prospectus. The Prospectus Supplement
will set forth the terms of the offering of the Common Stock, the initial
offering price and the net proceeds to the Selling Stockholder of the sale
thereof. Following the offering of all of the shares of Common Stock which may
be offered from time to time hereby, the Selling Stockholder will not own or
control any shares of Common Stock.
The Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE")
under the symbol "RN." A recent closing sale price of the Common Stock on the
NYSE will be set forth on the cover page of the Prospectus Supplement.
See "Certain Significant Considerations" in the Prospectus Supplement for a
description of certain factors that should be considered by purchasers of the
Common Stock offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Common Stock offered hereby may be sold directly to purchasers or
through agents designated from time to time by the Selling Stockholder or to or
through one or more underwriters. If any agents of the Selling Stockholder or
any underwriters are involved in the sale of Common Stock in respect of which
this Prospectus is being delivered, the names of such agents or underwriters and
any applicable commissions or discounts will be set forth in the Prospectus
Supplement.
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The date of this Prospectus is March 20, 1995.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Holdings with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 6066 1. Copies of such material also can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, material filed by
Holdings can be inspected at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Common
Stock. Statements contained herein concerning the provisions of any document are
not necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Holdings (File No.
1-10215) pursuant to the Exchange Act or the Securities Act, as applicable, are
incorporated by reference in this Prospectus:
1. Holdings' Annual Report on Form 10-K for the year ended December 31,
1994 (as amended by Form 10-K/A).
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained in this Prospectus or the Prospectus
Supplement, or in any subsequently filed document that also is or is deemed to
be incorporated by reference in this Prospectus, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to RJR Nabisco, Inc., 1301 Avenue of the Americas, New York, New York
10019 (telephone number (212) 258-5600), Attention: Investor Relations
Department.
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The Registration Statement is being filed by Holdings at the request of one
or more persons entitled to request the filing pursuant to the terms of a
Registration Rights Agreement among Holdings, certain affiliates of Kohlberg
Kravis Roberts & Co., L.P. ("KKR") and others dated as of February 9, 1989.
THE COMPANY
As used herein, "Holdings" or the "Company" means RJR Nabisco Holdings Corp.
and its consolidated subsidiaries unless the context otherwise requires.
RJR NABISCO HOLDINGS CORP.
The operating subsidiaries of Holdings owned through RJR Nabisco, Inc.
("RJRN") comprise one of the largest tobacco and food companies in the world. In
the United States, the tobacco business is conducted by R.J. Reynolds Tobacco
Company ("RJRT"), the second largest manufacturer of cigarettes, and the
packaged foods business is conducted by Nabisco Holdings Corp. ("Nabisco
Holdings") through its wholly-owned subsidiary, Nabisco, Inc. ("Nabisco"), the
largest manufacturer and marketer of cookies and crackers. RJRN owns
approximately 80.5% of the economic interest and approximately 97.6% of the
voting power of Nabisco Holdings. Tobacco operations outside the United States
are conducted by R.J. Reynolds Tobacco International, Inc. ("Tobacco
International") and packaged food operations outside the United States are
conducted by Nabisco International, Inc. ("Nabisco International") and Nabisco
Brands Ltd ("Nabisco Brands"), subsidiaries of Nabisco. RJRT's and Tobacco
International's tobacco products are sold around the world under a variety of
brand names. Food products are sold in the United States, Canada, Latin America
and certain other international markets.
TOBACCO
RJRT's largest selling cigarette brands in the United States include
WINSTON, DORAL, CAMEL, SALEM, MONARCH and VANTAGE. RJRT's other cigarette
brands, including MORE, NOW, BEST VALUE, STERLING, MAGNA and CENTURY, are
marketed to meet a variety of smoker preferences. All RJRT brands are marketed
in a variety of styles. Tobacco International operates in over 160 markets
around the world and is the second largest of two international cigarette
producers that have significant positions in the American Blend segment of the
international tobacco market.
FOOD
Nabisco's domestic operations represent one of the largest packaged food
businesses in the world. Through its domestic divisions, Nabisco manufactures
and markets cookies, crackers, snack foods, hard and bite-size candy, gum, nuts,
hot cereals, margarine, pet foods, dry-mix dessert products and other grocery
products under established and well-known trademarks, including OREO, CHIPS
AHOY!, NEWTONS, SNACKWELL'S, RITZ, PREMIUM, LIFE SAVERS, PLANTERS, A.1, GREY
POUPON, MILK-BONE, ORTEGA, CREAM OF WHEAT, FLEISCHMANN'S and BLUE BONNET.
Nabisco International is also a leading producer of biscuits, powdered dessert
and drink mixes, baking powder and other grocery items, industrial yeast and
bakery ingredients in many of the 17 Latin American countries in which it has
operations. Nabisco Brands conducts Nabisco's Canadian operations through a
biscuit division, a grocery division and a food service division. Excluding
private label brands, the biscuit division produced nine of the top ten cookies
and nine of the top ten crackers in Canada in 1994.
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RJRN was acquired in 1989 by an indirect, wholly owned subsidiary of
Holdings at the direction of KKR. KKR is a private investment firm organized as
a Delaware limited partnership.
The principal executive office of Holdings is located at 1301 Avenue of
Americas, New York, New York 10019; its telephone number is (212) 258-5600.
RECENT DEVELOPMENTS
On March 10, 1995, Nabisco filed with the Securities and Exchange Commission
a registration statement on Form S-4 (Registration No. 33-90224) (the "Form S-4
Registration Statement") pursuant to which RJRN intends to offer to exchange
(the "Exchange Offers") up to $1,917,650,000 aggregate principal amount of
newly-issued notes and debentures (the "New Notes") of Nabisco for any and all
of the $1,917,650,000 aggregate principal amount of certain outstanding notes
and debentures issued by RJRN (the "Old Notes"). As part of the Exchange Offers,
RJRN is soliciting consents from holders of Old Notes to certain proposed
amendments to the indentures pursuant to which the Old Notes were issued.
Concurrently with the Exchange Offers, RJRN also intends to solicit consents
from holders of $3,584,500,000 aggregate principal amount of outstanding debt
securities other than the Old Notes to certain proposed amendments to the
indentures pursuant to which such debt securities were issued (the "Other
Securities Consent Solicitations"). Fees will be paid to holders of such other
securities who consent to such amendments.
The Exchange Offers, the Other Securities Consent Solicitations and other
related transactions are designed, among other things, to enable Nabisco to
obtain long-term debt financing independent of RJRN and to reduce intercompany
debt.
The New Notes will initially be issued by Nabisco to RJRN in exchange for a
reduction of a portion of intercompany debt owed to RJRN. Nabisco expects to use
the proceeds of borrowings under its bank credit facilities to repay the
remainder of its intercompany debt. Such borrowings may be refinanced through
the issuance of intermediate-term notes. As a result of these transactions,
although the unconsolidated debt of RJRN will be substantially reduced and the
intercompany debt owed to RJRN will be eliminated, the consolidated debt of RJRN
will remain approximately the same as before the transactions.
Any New Notes issued pursuant to the Exchange Offers will be unsecured and
unsubordinated obligations of Nabisco and will rank pari passu with all existing
and future unsecured and unsubordinated indebtedness of Nabisco.
The Exchange Offers and Other Securities Consent Solicitations are subject
to a number of conditions, including the amendment or replacement of certain
credit agreements of RJRN and Nabisco. RJRN has reserved the right to terminate
the transactions contemplated by the Form S-4 Registration Statement, to waive
conditions to the consummation of such transactions and otherwise to modify the
terms of such transactions or of the Exchange Offers or the Other Securities
Consent Solicitations. Accordingly, no assurance can be given that such
transactions will be consummated or that they will consummated on the terms
described in the Form S-4 Registration Statement on file with the Commission on
the date hereof, which has not yet been declared effective by the Commission.
The Form S-4 Registration Statement has not been declared effective by the
Commission, and no offer or sale in respect of the securities proposed to be
registered thereunder will be made until such Form S-4 Registration Statement
becomes effective.
4
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data presented below as of December 31,
1994 and 1993 and for each of the years in the three-year period ended December
31, 1994 for Holdings were derived from the historical consolidated financial
statements of Holdings and notes thereto (the "Holdings Consolidated Financial
Statements"), incorporated herein by reference, which have been audited by
Deloitte & Touche LLP, independent auditors. In addition, the summary
consolidated financial data presented below as of December 31, 1992, 1991 and
1990 and for the years ended December 31, 1991 and 1990 were derived from the
audited consolidated financial statements of Holdings as of December 31, 1992,
1991 and 1990 and for the years ended December 31, 1991 and 1990, which are not
presented or incorporated by reference herein. The data presented below should
be read in conjunction with the Holdings Consolidated Financial Statements and
notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE
AMOUNTS) 1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales................................ $15,366 $15,104 $15,734 $14,989 $13,879
Cost of products sold.................... 6,977 6,640 6,326 6,088 5,652
Selling, advertising, administrative and
general expenses........................... 5,210 5,731 5,788 5,358 4,801
Amortization of trademarks and
goodwill................................... 629 625 616 609 608
Restructuring expense.................... -- 730 106 -- --
------- ------- ------- ------- -------
Operating income(1).................... 2,550 1,378 2,898 2,934 2,818
Interest and debt expense................ (1,065) (1,209) (1,449) (2,217) (3,176)
Other income (expense), net.............. (110) (58) 7 (69) (44)
------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes....... 1,375 111 1,456 648 (402)
Provision (benefit) for income taxes..... 611 114 680 280 60
------- ------- ------- ------- -------
Income (loss) from continuing
operations................................. 764 (3) 776 368 (462)
Extraordinary item--(loss) gain on early
extinguishments of debt, net of income
taxes...................................... (245) (142) (477) -- 33
------- ------- ------- ------- -------
Net income (loss)........................ 519 (145) 299 368 (429)
Preferred stock dividends................ 131 68 31 173 50
------- ------- ------- ------- -------
Net income (loss) applicable to common
stock...................................... $ 388 $ (213) $ 268 $ 195 $ (479)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PER SHARE DATA
Income (loss) before extraordinary item
per common and common equivalent
share(2)................................... $ 0.41 $ (0.05) $ 0.55 $ 0.22 $ (1.19)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Pro forma income (loss) before
extraordinary item per common and
common equivalent share(3)................. $ 2.06 $ (0.26) $ 2.73 $ 1.10 $ (5.93)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Dividends per share of Series A Preferred
Stock(4)................................... $ 2.92 $ 3.34 $ 3.34 $ 0.49 --
Dividends per share of Series C Preferred
Stock(4)................................... 3.94 -- -- -- --
BALANCE SHEET DATA (AT END OF PERIODS)
Working capital(5)....................... $(1,231) $ 202 $ 730 $ 165 $(1,089)
Total assets............................. 31,408 31,295 32,041 32,131 32,915
Total debt(5)............................ 11,149 12,448 14,218 14,531 18,918
Redeemable preferred stock(6)............ -- -- -- -- 1,795
Stockholders' equity(7).................. 10,908 9,070 8,376 8,419 2,494
</TABLE>
(Footnotes on following page)
5
<PAGE>
(Footnotes for preceding page)
- ------------
(1) The 1992 amount includes a gain of $98 million on the sale of the
ready-to-eat cold cereal business.
(2) The loss before extraordinary item per common and common equivalent share
reported for the year ended December 31, 1993 would have increased by $.17
per share if the weighted average number of shares of Series A Depositary
Shares (as defined below) outstanding during the period had been excluded
from the earnings per share calculation.
(3) Amounts reflect a one-for-five reverse split approved by the Board of
Directors of Holdings which will be submitted to Holdings' stockholders for
approval at its annual meeting in April 1995.
(4) On November 8, 1991, Holdings issued 52,500,000 shares of Series A
Conversion Preferred Stock, par value $.01 per share ("Series A Preferred
Stock"), and sold 210,000,000 $.835 depositary shares (the "Series A
Depositary Shares"), each of which represented one-quarter of a share of
Series A Preferred Stock. On May 6, 1994, Holdings issued 26,675,000 shares
of Series C Conversion Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), and sold 266,750,000 Series C Depositary Shares
(the "Series C Depositary Shares"), each of which represented one-tenth of a
share of Series C Preferred Stock. On November 15, 1994, each outstanding
Series A Depositary Share converted into one share of Holdings Common Stock.
(5) Working capital at December 31, 1994 included $1.35 billion of borrowings
under a credit agreement dated as of December 6, 1994 among Nabisco and the
lenders named therein, a substantial portion of which was used in connection
with the refinancing of certain debt. On January 26, 1995, such borrowings
were substantially reduced through the application of approximately $1.2
billion of net proceeds received from the initial public offering of
51,750,000 shares of Nabisco's Class A Common Stock.
(6) On December 16, 1991, an amendment to the Amended and Restated Certificate
of Incorporation of Holdings was filed which deleted the provisions
providing for the mandatory redemption of the redeemable preferred stock of
Holdings on November 1, 2015. Accordingly, such securities were presented as
a component of Holdings' stockholders' equity as of December 31, 1992 and
1991. Such securities were redeemed on December 6, 1993.
(7) Holdings' stockholders' equity at December 31 of each year from 1994 to 1990
includes non-cash expenses related to accumulated trademark and goodwill
amortization of $3.644 billion, $3.015 billion, $2.390 billion, $1.774
billion and $1.165 billion, respectively.
See Notes to Holdings Consolidated Financial Statements incorporated herein
by reference.
6
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed and principally traded on the NYSE (Symbol: RN).
The following table sets forth the high and low sales prices per share of the
Common Stock as reported on the NYSE Composite Tape.
<TABLE><CAPTION>
FISCAL YEAR HIGH LOW
- ----------------------------------------------------------- ---------------- ----------------
1993
<S> <C> <C>
First Quarter............................................ $ 9 1/4 $ 7 5/8
Second Quarter........................................... 8 1/8 5 1/8
Third Quarter............................................ 5 7/8 4 1/2
Fourth Quarter........................................... 7 3/8 4 3/8
1994
First Quarter............................................ $ 8 1/8 $ 5 5/8
Second Quarter........................................... 7 5 1/2
Third Quarter............................................ 7 1/8 5 5/8
Fourth Quarter........................................... 7 1/4 5 5/16
1995
First Quarter (through March 14, 1995)................... $ 6 $ 5
</TABLE>
At March 16, 1995, there were 1,362,183,648 shares of Common Stock
outstanding held by approximately 66,000 stockholders of record. A recent
reported closing sale price on the NYSE for shares of the Common Stock will be
set forth on the cover page of the Prospectus Supplement.
The Board of Directors of Holdings has approved a one-for-five reverse split
of the Common Stock, which will be submitted to Holdings' stockholders for
approval at its annual meeting in April 1995. If approved, the reverse stock
split would result in a dividend and earnings per share that are five times
higher with a corresponding reduction in the number of shares outstanding.
Holdings has indicated that, under normal circumstances, it does not plan to
issue additional equity securities for purposes of balance sheet improvement.
The Board of Directors of the Company has declared the first regular
quarterly cash dividend on the Common Stock of $.075 per share, or $.30 per
share on an annualized basis. The dividend is payable April 1, 1995 to
stockholders of record on March 10, 1995.
In addition, Holdings has announced certain policies affecting dividends on
the Common Stock. One policy provides that Holdings will limit, until December
31, 1998, the aggregate amount of cash dividends on its capital stock. Under
this policy, during that period Holdings will not pay any extraordinary cash
dividends and will limit the amount of its cash dividends, cash distributions
and repurchases for cash of capital stock and subordinated debt to an amount
equal to the sum of $500 million plus (i) 65% of Holdings' cumulative
consolidated net income before extraordinary gains or losses and restructuring
charges and (ii) net cash proceeds of up to $250 million in any year from the
sale of capital stock of Holdings or its subsidiaries (other than proceeds from
the initial public offering of the common stock of Nabisco Holdings) to the
extent used to repay, purchase or redeem debt or preferred stock. Another policy
provides that Holdings will not declare a dividend or distribution to its
stockholders of the shares of capital stock of a subsidiary before December 31,
1996. Another policy sets forth the intention of Holdings that it will not make
such a distribution prior to December 31, 1998 if that distribution would cause
the ratings of the senior indebtedness of RJRN to be reduced from investment
grade to non-investment grade or if, after giving effect to such distribution,
any publicly held senior indebtedness of the distributed company would not be
rated investment grade. There is no assurance that any such distribution will
take place. Additional policies provide that an amount equal to the net cash
proceeds from any issuance and sale of
7
<PAGE>
equity by Holdings or from any sale outside the ordinary course of business of
material assets owned or used by subsidiaries in the tobacco business, in each
case before December 31, 1998, will be used either to repay, purchase or redeem
consolidated indebtedness or to acquire properties, assets or businesses to be
used in existing or new lines of business and that an amount equal to the net
cash proceeds of any secondary sale of shares of Nabisco before December 31,
1998 will be used to repay, purchase or redeem consolidated debt. No assurance
can be given that Holdings will issue or sell any equity or sell any material
assets outside the ordinary course of business. See "Description of Holdings
Capital Stock--Contractual and Policy Restrictions on Payment of Dividends."
RJRN's credit agreement, dated as of December 1, 1991, as amended (the "1991
Credit Agreement"), and its credit agreement, dated as of April 5, 1993, as
amended (the "1993 Credit Agreement" and, together with the 1991 Credit
Agreement, the "Credit Agreements") restrict cash dividends and other
distributions on the Common Stock. In addition, the $1.5 billion short-term
credit facility (the "Nabisco Credit Agreement") of Nabisco restricts the
payment of dividends to RJRN. RJRN and Nabisco expect to amend or replace the
Credit Agreements and the Nabisco Credit Agreement, respectively, in connection
with the Exchange Offers, Other Securities Consent Solicitation and related
transactions. The amended or replacement credit facilities may contain similar
limitations on dividends and distributions. See "Description of Holdings Capital
Stock-- Contractual and Policy Restrictions on Payment of Dividends."
The timing, amount and form of future dividends, if any, will depend, among
other things, upon the effect of applicable restrictions on the payment of
dividends, results of operations, financial condition, cash requirements,
prospects and other factors deemed relevant by the Board of Directors of
Holdings.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Common
Stock offered by the Selling Stockholder.
DESCRIPTION OF HOLDINGS CAPITAL STOCK
The authorized capital stock of Holdings consists of 2,200,000,000 shares of
Common Stock and 150,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of March 16, 1995, 1,362,183,648 shares of Common
Stock were outstanding. As of such date, 42,010,690 shares of Preferred Stock
were outstanding, of which 50,000 shares were Series B Cumulative Preferred
Stock (the "Series B Preferred Stock"), 26,675,000 shares were Series C
Preferred Stock and 15,285,690 shares were ESOP Convertible Preferred Stock (the
"ESOP Preferred Stock").
The following is a description of the terms of the capital stock of
Holdings. This description does not purport to be complete and is qualified in
its entirety by reference to Holdings' Amended and Restated Certificate of
Incorporation, as amended (the "Holdings Certificate of Incorporation"), which
has been incorporated by reference as an exhibit to the Registration Statement
of which this Prospectus is a part and is incorporated by reference herein.
Holdings believes that the summaries of the Holdings Certificate of
Incorporation set forth below are accurate and complete summaries of the
material terms of such instruments.
COMMON STOCK
Each share of Common Stock is entitled to one vote at all meetings of
stockholders of Holdings for the election of directors of Holdings and on all
other matters. Dividends may be paid to the
8
<PAGE>
holders of Common Stock when, as and if declared by the Board of Directors of
Holdings out of funds legally available therefor. The Common Stock has no
preemptive or similar rights. Holders of Common Stock are not liable to further
call or assessment. Upon liquidation, dissolution or winding up of the affairs
of Holdings, any assets remaining after provision for payment of creditors (and
any liquidation preference of any outstanding preferred stock) would be
distributed pro rata among holders of the Common Stock.
On February 15, 1995, the Board of Directors of the Company declared the
first regular quarterly cash dividend on the Common Stock of $.075 per share, or
$.30 per share on an annualized basis. The dividend is payable April 1, 1995 to
stockholders of record on March 10, 1995. The timing, amount and form of future
dividends, if any, will depend, among other things, upon the effect of
applicable restrictions on the payment of dividends, results of operations,
financial condition, cash requirements, prospects and other factors deemed
relevant by the board of directors of Holdings. See "Description of Holdings
Capital Stock--Contractual and Policy Restrictions on Payment of Dividends."
The Common Stock is listed on the NYSE. First Chicago Trust Company of New
York is the registrar and transfer agent for the Common Stock.
PREFERRED STOCK
SERIES B PREFERRED STOCK. Each share of Series B Preferred Stock is entitled
to receive, when, as and if declared by the Board of Directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends at
the rate per annum of 9.25%, payable quarterly in arrears. On and after August
19, 1998, Holdings, at its option upon not less than 30 nor more than 60 days'
notice, may redeem shares of the Series B Preferred Stock, as a whole or in
part, at any time, at a redemption price equivalent to $25,000 per share, plus
accrued and unpaid dividends thereon to the date fixed for redemption, without
interest, to the extent Holdings will have funds legally available therefor.
The Series B Preferred Stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption. The Series B Preferred Stock is not
convertible into, or exchangeable for, shares of any other class or series of
stock of Holdings.
The holders of the Series B Preferred Stock do not have any voting rights,
except as otherwise provided by law and under certain other limited
circumstances.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series B Preferred Stock will be entitled to receive
$25,000 per share, plus an amount equal to any accrued and unpaid dividends,
before any distribution is made on any class of junior securities, including
Common Stock.
SERIES C PREFERRED STOCK. Each share of Series C Preferred Stock is entitled
to receive, when, as and if declared by the Board of Directors of Holdings, out
of funds legally available therefor, cumulative preferential cash dividends
accruing at a rate of $6.012 per annum, payable quarterly in arrears. Each share
of Series C Preferred Stock will mandatorily convert into ten shares of Common
Stock on May 15, 1997, subject to adjustment in certain events (the "Series C
Common Stock Equivalent"), plus accrued and unpaid dividends on the Series C
Preferred Stock until the date of conversion. In addition, each share of Series
C Preferred Stock may be redeemed by Holdings, in whole or in part, at any time
or from time to time prior to the mandatory conversion date at a redemption
price to be paid in shares of Common Stock (or following certain circumstances,
other consideration), plus accrued and unpaid dividends. The optional redemption
price declines from $112.286 per share by $.01656 per share on each day
following May 6, 1994 to $95.246 per share on March 15, 1997, and is $94.25
thereafter (the "Call Price").
9
<PAGE>
Immediately prior to a merger or consolidation of Holdings (other than a
merger or consolidation of Holdings with or into a wholly owned subsidiary of
Holdings) that results in the conversion or exchange of Common Stock into other
securities or property, outstanding Series C Preferred Stock may be converted at
the option of Holdings into (i) shares of Common Stock at a rate equal to the
Series C Common Stock Equivalent (currently ten shares for each share of Series
C Preferred Stock), in effect immediately prior to such merger or consolidation,
plus (ii) the right to receive an amount in cash (which may, at the option of
Holdings, be payable in shares of Common Stock) equal to all accrued and unpaid
dividends on such Series C Preferred Stock to and including the Settlement Date,
plus (iii) the right to receive an amount of cash (which may, at the option of
Holdings, be payable in shares of Common Stock) initially equal to $18.036 per
share, declining by $.01656 on each day following May 6, 1994 to $.996 on March
15, 1997 and equal to zero thereafter. The shares of Common Stock issuable under
clause (i) above will be reduced, if necessary, so that the value of the
aggregate consideration described in clauses (i) and (iii) above does not exceed
the Call Price on the Settlement Date. Alternatively, Holdings may cause the
Series C Preferred Stock to remain outstanding or convert into a substantially
similar security of Holdings or of the entity issuing the consideration in such
merger or consolidation. In that event, each holder of a share of Series C
Preferred Stock may elect to convert the Series C Preferred Stock into Common
Stock at a rate equal to the Series C Common Stock Equivalent immediately prior
to the merger or consolidation (provided that the number of shares of Common
Stock issuable will be reduced, if necessary, so that the value of such shares
does not exceed the Call Price on the Settlement Date), plus the right to
receive an amount of cash (which may, at the option of Holdings, be payable in
shares of Common Stock) equal to all accrued and unpaid dividends on such Series
C Preferred Stock to and including the Settlement Date.
If Holdings has recommended acceptance of (or has expressed no opinion and
is remaining neutral toward) a tender offer which would result in the ownership
by the bidder (or an affiliate of the bidder) of more than 50% of the then
outstanding Common Stock, then each holder of Series C Preferred Stock will have
the option to convert such shares, in whole (but not in part), into Common Stock
at the Series C Common Stock Equivalent in effect at the close of business on
the day prior to the date of expiration or termination of such tender offer;
provided that the number of shares of Common Stock issuable upon such conversion
will be reduced if necessary, so that the value of such shares does not exceed
the Call Price on such date.
If Holdings distributes to holders of Common Stock the capital stock of a
subsidiary representing all or substantially all of either of Holdings' two
present principal lines of business (the "Spinoff Company"), Holdings will
(subject to the final sentence of this paragraph) convert each share of Series C
Preferred Stock into one-half of a share of the existing Series C Preferred
Stock and one-half of a share of a substantially equivalent security of the
Spinoff Company. In such case, the conversion rate per share of the new Series C
Preferred Stock will be equal to a fraction, of which the numerator will be the
product of the market price of Common Stock prior to the distribution and the
Series C Common Stock Equivalent and of which the denominator will be the excess
of the market price of Common Stock prior to the distribution over the market
value of a share of the Spinoff Company. The conversion rate per share of the
new security of the Spinoff Company will be equal to a fraction, of which the
numerator will be the product of the market price of Common Stock prior to the
distribution and the Series C Common Stock Equivalent and of which the
denominator will be the market value of a share of the Spinoff Company.
Alternatively, Holdings may elect to distribute to each holder of Series C
Preferred Stock the number of shares of capital stock of the Spinoff Company
that such holder would have been entitled to receive if the Series C Preferred
Stock had been converted to Common Stock immediately prior to the distribution
at the Series C Common Stock Equivalent then in effect. In the event that either
(a) the fair value of the shares of the Spinoff Company distributed are greater
than or equal to 95% of the market price of Common Stock prior to the
distribution or (b) the record date for the distribution is fixed less than
twenty-one trading days prior to such record date, then Holdings must elect to
distribute the shares of the
10
<PAGE>
Spinoff Company to the holders of the shares of Series C Preferred Stock in
accordance with the preceding sentence.
Holders of Series C Preferred Stock have the right, voting together with the
holders of Common Stock (and any other class of capital stock of Holdings
entitled to vote together with the Common Stock, including the ESOP Preferred
Stock) as one class, to vote in the election of directors and upon each other
matter coming before any meeting of the stockholders on the basis initially of
one vote (equal to one-tenth of the Series C Common Stock Equivalent) for each
Series C Preferred Stock held; provided that the holders of Series C Preferred
Stock are not entitled to vote on any increase or decrease in the number of
authorized shares of any class or classes of stock. In the event dividends on
all series of Preferred Stock, including the Series C Preferred Stock, were in
arrears and unpaid for six quarterly periods, the holders of Series C Preferred
Stock, together with the holders of all other outstanding series of Preferred
Stock entitled to vote thereon, would be entitled to elect two additional
directors to the Board of Directors of Holdings until all cumulative dividends
on all series of Preferred Stock, have been paid or declared and set aside for
payment; provided that such directors may not have exceeded 25% of the total
Board of Directors or be less than one director. While such holders are entitled
to elect two directors, they would not be entitled to participate with the
holders of Common Stock in the election of any other directors, but would have
continued to vote with the holders of Common Stock upon each other matter coming
before any meeting of the stockholders.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of Series C Preferred Stock will be entitled to receive $60.50
per share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Common Stock.
ESOP PREFERRED STOCK. Each share of ESOP Preferred Stock is entitled to
receive, when, as and if declared by the Board of Directors of Holdings, out of
funds legally available therefor, cumulative cash dividends at a rate of 7.8125%
of stated value per annum ($1.25 per annum) at least until April 10, 1999,
payable semi-annually in arrears. Each share of ESOP Preferred Stock is
convertible into one share of Common Stock, subject to adjustment in certain
events. The ESOP Preferred Stock is redeemable at the option of Holdings, in
whole or in part, at any time on or after April 10, 1999, at an initial optional
redemption price of $16.25 per share, declining thereafter on an annual basis in
the amount of $.125 a year to $16 per share on April 10, 2001, plus accrued and
unpaid dividends. Under certain other circumstances, the ESOP Preferred Stock is
subject to redemption at any time. Holders of ESOP Preferred Stock have voting
rights which are generally consistent with those of the holders of Series C
Preferred Stock.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Holdings, holders of ESOP Preferred Stock will be entitled to receive $16.00 per
share, plus an amount equal to any accrued and unpaid dividends, before any
distribution is made on any class of junior securities, including Common Stock.
CONTRACTUAL AND POLICY RESTRICTIONS ON PAYMENT OF DIVIDENDS
Holdings is subject to various contractual restrictions on its ability to
pay dividends on its Preferred Stock and Common Stock.
Under the Credit Agreements, Holdings may (i) issue shares of Common Stock
upon the exercise of any warrants or options or upon the conversion or
redemption of any convertible or redeemable preferred stock and, in connection
with any such exercise, conversion or redemption, Holdings may pay cash in lieu
of issuing fractional shares of Common Stock; (ii) if no event of default
existed under the Credit Agreements, repurchase Common Stock (and/or options or
warrants in respect thereof) pursuant to, and in accordance with the terms of,
management and/or
11
<PAGE>
employee stock plans; (iii) if no event of default existed under the Credit
Agreements, declare and pay, or otherwise effect, any other cash dividend or
other dividend or distribution, or repurchase or redeem any capital stock,
provided that the aggregate amount of such dividends, distributions, repurchases
and redemptions, when added to all dividends, distributions, repurchases and
redemptions made in accordance with this clause (iii) after November 22, 1994,
would not exceed an amount equal to the sum of (x) $1 billion plus (y) 50% of
the sum of (A) consolidated net income of Holdings and its subsidiaries for the
period (taken as one accounting period) from January 1, 1995 to the last day of
the last fiscal quarter of Holdings then ended plus (B) all losses from debt
retirement deducted in determining consolidated net income of Holdings and its
subsidiaries for the period referred to in clause (A) above plus (z) the
aggregate cash proceeds (net of underwriting discounts and commissions) received
by Holdings after November 22, 1994 from issuances of its equity securities
(provided that the aggregate amount of such aggregate net cash proceeds received
in any twelve-month period shall be deemed not to exceed $250 million for
purposes of this clause (iii)(z)), in each case determined at the time of the
declaration thereof, provided that such dividend, distribution or redemption
payment was paid within 45 days of the making of such declaration; (iv) issue
and exchange shares of any class or series of its common stock now or hereafter
outstanding for shares of any other class or series of its common stock now or
hereafter outstanding; and (v) in connection with any reclassification of its
common stock and any exchange permitted by clause (v) above, pay cash in lieu of
issuing fractional shares of any class or series of its common stock. The
Nabisco Credit Agreement also limits payment of dividends by Nabisco to $300
million plus 50% of the cumulative consolidated net income of Nabisco commencing
January 1, 1995. RJRN and Nabisco expect to amend or replace the Credit
Agreements and the Nabisco Credit Agreement, respectively, in connection with
the Exchange Offers, Other Securities Consent Solicitation and related
transactions. The amended or replacement credit facilities may contain similar
limitations on dividends and distributions.
In addition to the contractual restrictions referred to above, the Board of
Directors of Holdings has adopted a policy, under which Holdings will limit,
until December 31, 1998, the aggregate amount of cash dividends on its Capital
Stock. Under this policy, Holdings:
(a) will not pay any extraordinary cash dividends;
(b) will not make any Restricted Payment if, after giving effect to such
Restricted Payment, the aggregate amount expended for all Restricted
Payments subsequent to December 31, 1994 exceeds the sum of (i) $500
million, plus (ii) 65% of Consolidated Net Income of Holdings on a
cumulative basis subsequent to December 31, 1994, plus (iii) aggregate cash
proceeds of up to $250 million received in any year subsequent to December
31, 1994 by Holdings or a Subsidiary from the issuance and sale (other than
to a Subsidiary) of Holdings' or such Subsidiary's Capital Stock (or of
other securities that are subsequently converted into or exchanged for
Holdings' or such Subsidiary's Capital Stock) (other than proceeds from the
initial public offering of common stock of Nabisco Holdings), it being
understood that any aggregate net cash proceeds from any issuance and sale
of any Capital Stock will be counted only up to the amount of any
indebtedness or preferred stock of Holdings or any Subsidiary that has been
repaid, purchased, redeemed or otherwise acquired for value by Holdings or
any Subsidiary within one year before or after such issuance and sale. If
Holdings or a Subsidiary repays, purchases, redeems or otherwise acquires
for value indebtedness or preferred stock of Holdings or a Subsidiary in
exchange for Capital Stock of Holdings or a Subsidiary, Holdings or such
Subsidiary shall be deemed to have received the net cash proceeds equal to
the market value of the Capital Stock so issued in exchange (such market
value to be determined by Holdings' Board of Directors, whose good faith
determination shall be conclusive);
(c) will use an amount equal to the net cash proceeds received prior to
December 31, 1998 from (i) the issuance and sale by Holdings of any Capital
Stock (other than to a
12
<PAGE>
Subsidiary or current, future or former directors, officers or employees of
Holdings or any Subsidiary (or their estates or beneficiaries under their
estates)) or (ii) any sale outside the ordinary course of business of
material assets owned or used by any of its Subsidiaries in the tobacco
business (other than to another Subsidiary) either to repay, purchase,
redeem or otherwise acquire for value indebtedness of Holdings or a
Subsidiary or to acquire properties, assets or businesses to be used in
existing or new lines of business of Holdings or its Subsidiaries; and
(d) will use an amount equal to the net cash proceeds received by
Holdings or RJRN prior to December 31, 1998 from the sale to third parties
of shares of common stock of Nabisco held by either of them to repay,
purchase, redeem or otherwise acquire for value indebtedness of Holdings or
a Subsidiary.
The foregoing policy will not prevent the payment of a cash dividend within
90 days of its declaration if, at the time of declaration, such payment would
have complied with the foregoing policy or the purchase, redemption,
acquisition, cancellation or other retirement for value of Capital Stock,
options on Capital Stock, stock appreciation rights or similar securities held
by current, future or former directors, officers or employees of Holdings or any
Subsidiary or certain trusts or estates for their benefit.
Holdings has also adopted a policy to the effect that it will not declare a
dividend or distribution on its Capital Stock prior to December 31, 1996 that is
paid in Capital Stock of a Subsidiary owned by Holdings or a Subsidiary and that
it is its intent not to make such a distribution to its stockholders prior to
December 31, 1998 if (a) such distribution would cause the ratings of RJRN's
publicly held senior indebtedness to be reduced from investment grade to
non-investment grade or (b) any publicly held senior indebtedness of the
distributed Subsidiary would, after giving effect to such distribution, be rated
non-investment grade.
For purposes of the foregoing policies:
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock and any rights
(other than debt securities convertible into capital stock), warrants or
options to acquire such Capital Stock.
"Consolidated Net Income" of Holdings means, for any period, the
aggregate consolidated net income of Holdings and its Subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles as in effect from time to time, adjusted by
excluding (to the extent not otherwise excluded in calculating consolidated
net income) any net extraordinary gain or net extraordinary loss, as the
case may be, and any restructuring charges.
"Restricted Payment" means (i) any payment of any cash dividend or
distribution by Holdings on its Capital Stock, (ii) any purchase, redemption
or other acquisition for cash by Holdings of its Capital Stock (other than
any such purchase, redemption or acquisition for value in exchange for, or
in an amount equal to the proceeds of, an offering of Capital Stock of
Holdings or any Subsidiary or, in the case of Holdings' Series B Preferred
Stock or any other non-convertible preferred stock of Holdings outstanding
from time to time), for indebtedness of Holdings or any Subsidiary and (iii)
any purchase, redemption or other acquisition for cash by Holdings of any
Subordinated Debt prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment (other than any such purchase, redemption or
other acquisition for value in exchange for, or in an amount equal to the
proceeds of, an offering of Capital Stock or Subordinated Debt of Holdings
or any Subsidiary).
"Subordinated Debt" means any indebtedness of Holdings or any Subsidiary
which by its terms is expressly subordinated in right of payment to any
other indebtedness of Holdings or
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any Subsidiary, provided, however, that the term Subordinated Debt shall not
include any intercompany indebtedness.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by Holdings.
CERTAIN STATUTORY AND BY-LAW PROVISIONS
Holdings is subject to the "business combination" statute of the Delaware
General Corporation Law (the "DGCL"). In general, Section 203 of the DGCL
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an "interested
stockholder," unless (a) prior to such date the Board of Directors of the
corporation approved either the "business combination" or the transaction which
resulted in the stockholder becoming an "interested stockholder," (b) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the "interested stockholder" owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (i) by persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (c) on or subsequent to
such date the "business combination" is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" includes mergers, certain
stock or asset sales and certain other transactions resulting in a financial
benefit to, or increase in voting power held by, the "interested stockholders."
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or if such person is an affiliate or associate of the
corporation within three years, did own) 15% or more of the corporation's voting
stock.
Holdings' By-laws establish an advance notice procedure for stockholders to
make nominations of candidates for election as directors, or to bring other
business before an annual meeting of stockholders of Holdings. The By-laws
provide that only persons who are nominated by, or at the direction of, the
Board of Directors of Holdings or any committee designated by the Board of
Directors of Holdings, or by a stockholder who has given timely written notice
to the Secretary of Holdings prior to the meeting at which directors are to be
elected, will be eligible for election as directors of Holdings. The By-laws
also provide that in order to properly submit any business to an annual meeting
of stockholders, a stockholder must give timely written notice to the Secretary
of Holdings of such stockholder's intention to bring such business before such
meeting. Generally, for notice of stockholder nominations or other business to
be made at an annual meeting to be timely under the By-laws, such notice must be
received by Holdings (i) not less than 120 days nor more than 150 days before
the first anniversary date of Holdings' proxy statement in connection with the
last annual meeting of stockholders or (ii) if no annual meeting was held in the
previous year or the date of the applicable annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, not less than a reasonable time, as determined by the Board of
Directors of Holdings, prior to the date of the applicable annual meeting. Under
the By-laws, a stockholder's notice must also contain certain information
specified in the By-laws.
The provisions described above, together with certain terms of Holdings
outstanding Preferred Stock and its ability to issue additional Preferred Stock,
may have the effect of delaying stockholder actions with respect to certain
business combinations and the election of new members of
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the Board of Directors of Holdings. As such, the provisions could have the
effect of discouraging open market purchases of Common Stock because they may be
considered disadvantageous by a stockholder who desires to participate in a
business combination or elect a new director.
SELLING STOCKHOLDER
Prior to the offering of any shares of Holdings Common Stock pursuant to
this Prospectus, Borden beneficially owns 111,047,229 shares of Holdings Common
Stock, representing approximately 8.15% (6.52% on a fully diluted basis) of the
outstanding shares of Holdings Common Stock as of March 16, 1995. After the
offering of all of the shares of Holdings Common Stock which may be offered from
time to time hereby, the Selling Stockholder will not own any shares of Holdings
Common Stock. As described further under "Plan of Distribution," the Selling
Stockholder may issue securities which are convertible, exchangeable or
redeemable at some future date into or for all or a portion of the shares of the
Holdings Common Stock owned by the Selling Stockholder.
The Selling Stockholder is wholly owned by affiliates of KKR, and received
the shares of Holdings Common Stock to be offered pursuant to this Prospectus
from such affiliates. Following the sale of all of the shares of Holdings Common
Stock that may be offered hereby, KKR and its affiliates will own or control
fewer than 0.1% of the outstanding shares of Holdings Common Stock as of March
16, 1995. Currently, seven of Holdings' sixteen directors are partners of KKR.
None of the nominees for election to Holdings' Board of Directors at Holdings'
annual meeting in April 1995 are partners of KKR.
PLAN OF DISTRIBUTION
The Company has been advised that the distribution of the Common Stock by
the Selling Stockholder may be effected in and/or outside the United States: (i)
through underwriters or dealers; (ii) directly to a limited number of purchasers
or to a single purchaser; (iii) through agents; or (iv) in the event that the
Selling Stockholder issues securities of its own which are convertible,
exchangeable or redeemable for or into shares of Holdings Common Stock, upon
conversion, exchange or redemption of such securities of the Selling
Stockholder. The Prospectus Supplement with respect to the Common Stock being
offered (the "Offered Shares") will set forth the terms of the offering of the
Offered Shares, including the name or names of any underwriters or agents, the
purchase price of the Offered Shares and the proceeds to the Selling Stockholder
from such sale, any delayed delivery arrangements, any underwriting discounts
and other items constituting underwriters' compensation, any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
The Company has been further advised that, if underwriters are used in the
sale, the Offered Shares will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Common Stock may be offered
to the public either through underwriting syndicates represented by one or more
managing underwriters or directly by one or more firms acting as underwriters.
The underwriter or underwriters with respect to a particular underwritten
offering of Common Stock will be named in the Prospectus Supplement relating to
such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters, will be set forth on the cover of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Supplement relating
thereto, the obligations of the underwriters to purchase the Offered Shares will
be subject to conditions precedent and the underwriters will be obligated to
purchase all the Offered Shares if any are purchased.
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If dealers are utilized in the sale of Offered Shares in respect of which
this Prospectus is delivered, the Company has been advised that the Selling
Stockholder will sell such Offered Shares to the dealers as principals. The
dealers may then resell such Offered Shares to the public at varying prices to
be determined by such dealers at the time of resale. The names of the dealers
and the terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
In addition, the Company has been advised that the Common Stock may be sold
directly by the Selling Stockholder or through agents designated by the Selling
Stockholder from time to time. Any agent involved in the offer or sale of the
Offered Shares in respect of which this Prospectus is delivered will be named,
and any commissions payable by the Selling Stockholder to such agent will be set
forth, in the Prospectus Supplement.
Agents and underwriters may be entitled under agreements entered into with
the Company and the Selling Stockholder to indemnification by the Company and
the Selling Stockholder against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which the
agents or underwriters may be required to make in respect thereof. Agents and
underwriters may be customers of, may engage in transactions with, or perform
services for, the Company and the Selling Stockholder in the ordinary course of
business.
In connection with the sale of the Common Stock, underwriters or agents may
be deemed to have received compensation from the Selling Stockholder in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Common Stock for whom they may act as agent. Underwriters or
agents may sell the Common Stock to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agent.
Any underwriters, dealers or agents participating in the distribution of the
Common Stock may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Common Stock
may be deemed to be underwriting discounts and commissions under the Securities
Act of 1933.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for Holdings by Jo-Ann Ford, Senior Vice President, Law and Secretary of
Holdings and for the underwriters, brokers or agents by counsel to such
underwriters, brokers or agents. Ms. Ford owns options to purchase shares of
Common Stock which represent less than 0.1% of the currently outstanding shares
of Common Stock.
EXPERTS
The consolidated financial statements of Holdings incorporated in this
Prospectus by reference from Holdings' Annual Report on Form 10-K have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR BY THE UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, THE SELLING STOCKHOLDER OR BY THE
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE SHARES OF THE
SECURITIES OFFERED HEREBY OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT
PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE
POSSESSION THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS COMES ARE REQUIRED
BY THE COMPANY, THE SELLING STOCKHOLDER AND THE UNDERWRITER TO INFORM
THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE
SECURITIES OFFERED HEREBY AND THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Significant Considerations............... S-2
Plan of Distribution..................... S-6
Legal Matters............................ S-6
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents by
Reference................................ 2
The Company.............................. 3
Summary Historical Consolidated
Financial Data......................... 5
Price Range of Common Stock and
Dividends................................ 7
Use of Proceeds.......................... 8
Description of Holdings Capital Stock.... 8
Selling Stockholder...................... 15
Plan of Distribution..................... 15
Legal Matters............................ 16
Experts.................................. 16
111,047,229 SHARES
RJR NABISCO HOLDINGS CORP.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
[RJR NABISCO LOGO]
GOLDMAN, SACHS & CO.
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