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RJR Nabisco Holdings Corp.
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(Name of Registrant as Specified In Its Charter)
RJR Nabisco Holdings Corp.
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[RJR NABISCO LOGO]
January 5, 1996
DEAR FELLOW SHAREHOLDER:
In an attempt to profit at the expense of RJR Nabisco shareholders, Bennett
S. LeBow, who has been associated with a number of corporate bankruptcies, and
Carl C. Icahn, a corporate raider and greenmailer, have launched a dangerous and
misleading solicitation of consents from shareholders. Their consent
solicitation demands an irresponsibly timed spin-off of the Nabisco food
business and a change in our corporate by-laws that could enable them to gain
control of your company without the support of owners of a majority of the
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company's outstanding shares.
WE STRONGLY URGE YOU NOT TO SIGN OR RETURN ANY OF THE BLUE CONSENT CARDS
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SENT TO YOU BY THE LEBOW/ICAHN GROUP OR ITS AGENTS, INCLUDING BROOKE GROUP.
YOUR BOARD ALREADY IS COMMITTED TO A SPIN-OFF OF NABISCO--AS SOON AS IT CAN BE
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ACCOMPLISHED IN A MANNER THAT IS CONSISTENT WITH THE COMPANY'S COMMITMENTS AND
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DOES NOT PUT YOUR FINANCIAL INTERESTS IN JEOPARDY.
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Your board of directors has already taken a number of steps over the past
year that were necessary to allow a spin-off of Nabisco when it will not
jeopardize your investment. We retained the best legal, tax and financial
advisors available to review the timing and assess the potential benefits of a
spin-off. In consultation with these advisors, YOUR DIRECTORS CONCLUDED,
UNANIMOUSLY, THAT AN IMMEDIATE SPIN-OFF WOULD UNDERMINE, NOT INCREASE, YOUR
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SHARE VALUE. We have studied this matter in depth and believe that we are in a
better position to make a successful spin-off happen at the right time than are
Bennett LeBow and Carl Icahn.
WE BELIEVE BENNETT LEBOW AND CARL ICAHN ARE USING THIS CONSENT SOLICITATION
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PROCESS TO TRY TO GAIN CONTROL OF RJR NABISCO IN ORDER TO ENRICH THEMSELVES AT
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YOUR EXPENSE.
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LeBow and Icahn are best known for a series of corporate raids that
resulted in "junk bond"-financed takeovers or "greenmail" buy offs, usually at
the expense of other investors. In recent years, both have been involved in
highly visible corporate bankruptcies, including TWA and Western Union.
WE BELIEVE THAT LEBOW AND ICAHN, WITH ALL THEIR EXPERIENCE, ARE FULLY AWARE
OF THE RISKS INVOLVED WITH THEIR PROPOSAL AND KNOW QUITE WELL THAT AN IMMEDIATE
SEPARATION IS NOT PRACTICABLE. WE BELIEVE THAT THEY ARE DELIBERATELY OVERSTATING
THE FINANCIAL BENEFITS OF SUCH A SPIN-OFF IN ORDER TO MASK THEIR REAL GOAL: TO
GAIN CONTROL OF RJR NABISCO AND ITS CASH FLOWS:
. The LeBow/Icahn group has already submitted a slate of nominees for election
to RJR Nabisco's board of directors and control of the company. THIS SLATE OF
DIRECTOR CANDIDATES HAS BEEN HAND-PICKED BY LEBOW TO ACCOMPLISH HIS AGENDA.
. Although LeBow has not disclosed this information in the previous letters he
sent to you, LeBow has finally had to admit that his agreements with Icahn
contemplate that LeBow will combine
<PAGE>
his failing Liggett tobacco business with RJR's tobacco business--and that
LeBow will pay Icahn $50 million for the privilege of doing so. IN FACT, BASED
ON THE SIMILAR TRANSACTION PREVIOUSLY PROPOSED BY LEBOW TO THE COMPANY,
BENNETT LEBOW WOULD REAP UP TO A $1 BILLION PROFIT FROM SUCH TRANSACTION--AND
THAT MONEY WOULD COME DIRECTLY OUT OF THE POCKETS OF RJR NABISCO'S
SHAREHOLDERS.
MANY INDEPENDENT FINANCIAL ANALYSTS HAVE PUBLISHED RESEARCH REPORTS CONSISTENT
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WITH THE VIEWS OF RJR NABISCO'S BOARD AND MANAGEMENT ON THE ISSUE OF A
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SPIN-OFF.*
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. Martin Feldman, an analyst at Smith Barney, said in a December 13, 1995
research report, "LEBOW PRESSURE FOR A QUICK NA SPIN-OFF IS BAD NEWS FOR RN."
. David Adelman, an analyst at Dean Witter Reynolds, said in an August 31, 1995
research report, "WHILE SPINNING OFF RJR NABISCO'S 80.5% STAKE IN NABISCO
WOULD LIKELY BE A VALUE-ENHANCING TRANSACTION, WE CONTINUE TO BELIEVE THAT RJR
NABISCO WOULD BE UNABLE TO DO THIS IN THE CURRENT LITIGATION ENVIRONMENT." In
an October 30, 1995 report, Mr. Adelman said, "We estimate the incremental
spin-off value at $2-4 per share." **
. Marc Cohen, an analyst at Goldman, Sachs, in an October 9, 1995 research
report titled "Be Wary of Simple Solutions to Complex Problems," noted that
"...THERE IS RISK GIVEN CURRENT TOBACCO LITIGATION CIRCUMSTANCES THAT A COURT
COULD NOT ONLY ENJOIN RJR FROM DISTRIBUTING THE NA STOCK, BUT ALSO
INDEFINITELY INTERFERE WITH CASH DISPOSITIONS RELATED TO OTHER BUSINESS
AFFAIRS (I.E., A DIVIDEND INCREASE)." In a November 1, 1995 report, Mr. Cohen
said, "A spin-off of Nabisco may produce only a $2-3 increase in RN's stock
price." ***
. Anthony Brenner, an analyst at UBS Securities, said in a December 11, 1995
research report, "WE DO NOT BELIEVE IT WOULD BE A GOOD IDEA TO SPIN OFF
NABISCO FOODS TO SHAREHOLDERS AT THE PRESENT TIME, AS IS ADVOCATED BY BENNETT
LEBOW, CEO OF BROOKE GROUP, LTD., AND CARL ICAHN...We believe it is extremely
important to establish a positive sales and earnings trend prior to a spin-off
for both the domestic and international tobacco businesses."
. Oppenheimer analyst Roy Burry said in an October 30, 1995 research report,
"THE GAINING OF CONTROL OF RJR NABISCO BY LEBOW/ICAHN ALSO RAISES RISKS TO
OUTSIDE SHAREHOLDERS. Past actions by both these individuals establish
substantial uncertainties as to their motivations once in control of the
company and the impact of this strategy upon outside shareholders."
DO NOT ALLOW YOURSELF TO BE MISLED BY LEBOW AND ICAHN. EVEN TWO OF THE ANALYSTS
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CITED IN THEIR CONSENT MATERIALS DO NOT ENDORSE THEIR PROPOSAL FOR AN IMMEDIATE
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SPIN-OFF OF NABISCO.
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. Despite LeBow/Icahn's inclusion of a report by Rodman & Renshaw analyst Ronald
B. Morrow in a list of analysts that purport to "support [LeBow and Icahn's]
position that stockholders would benefit from a spinoff," the research report
they cite does not even attempt to set forth a value of the spin-off. IN FACT,
LEBOW/ICAHN OMITTED ANY REFERENCE TO MR. MORROW'S DECEMBER 6, 1995 REPORT, IN
WHICH HE SAID, "WE DO NOT EXPECT AN IMMEDIATE SPIN-OFF...TO INCREASE RN'S
PRICE BEYOND THE MID-30S." In a November 21, 1995 report, Mr. Morrow said,
"While we do believe that the split of assets if sold separately could
generate higher short-term returns for common shareholders, we view the
likelihood of the total sale of RN's assets with low probability and certainly
not in the best interests of the stakeholders."
<PAGE>
. Diana Temple, the Salomon Brothers analyst cited by LeBow/Icahn, said in a
December 6, 1995 research report that, "WE DO NOT BELIEVE A SPIN OFF OF
TOBACCO IS LIKELY IN 1996 BECAUSE OF UNCERTAINTY ON LITIGATION."
YOUR INTERESTS--AND THE BEST CHANCE FOR A SUCCESSFUL SPIN-OFF OF NABISCO AT THE
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RIGHT TIME--ARE BEST SERVED BY RJR NABISCO'S BOARD OF DIRECTORS AND MANAGEMENT.
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For you to benefit, a spin-off must first be accomplished without delays or
uncertainties arising from court challenges; second, be tax-free to you; and
third, preserve the financial integrity of our food and tobacco businesses. THE
LEBOW/ICAHN PROPOSAL FOR AN IMMEDIATE SPIN-OFF DOES NOT MEET THESE REQUIREMENTS.
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By pushing for an immediate spin-off, LEBOW AND ICAHN HAVE INVITED
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POTENTIALLY DAMAGING LAWSUITS AGAINST YOUR COMPANY THAT COULD MAKE A SPIN-OFF AT
THE RIGHT TIME MORE DIFFICULT. They also are advocating that your company break
good faith commitments that made it possible in early 1995 to start paying
common stock dividends to you.
The RJR Nabisco board of directors is obligated to represent the best
interests of all of the company's shareholders--not just a select few, like
LeBow and Icahn. Your board is committed to completing a spin-off of Nabisco
shares to you at a time when the transaction can be completed successfully, when
it will benefit all shareholders and is consistent with the company's
commitments.
WE BELIEVE THAT LEBOW AND ICAHN WANT TO BE ABLE TO GAIN CONTROL OF RJR NABISCO
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AND EXPLOIT THE COMPANY FOR THEIR OWN BENEFIT--EVEN IN THE EVENT THAT HOLDERS OF
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A MAJORITY OF THE COMPANY'S SHARES DO NOT AGREE WITH THEM.
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In addition to proposing an immediate spin-off of Nabisco, LEBOW AND ICAHN
HAVE PROPOSED A CHANGE IN THE COMPANY'S BY-LAWS THAT WOULD ALLOW A MINORITY
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GROUP OF SHAREHOLDERS--LIKE THE ONE LED BY LEBOW AND ICAHN--TO CALL A SPECIAL
MEETING TO SEIZE CONTROL OF YOUR COMPANY.
Your board believes that financiers with track records like LeBow and
Icahn--who in the past have demonstrated a reckless disregard of the interests
of other shareholders and a willingness to use corporate funds for their own
personal gain--should not be able to gain control of this company unless holders
of a majority of the company's shares agree. LeBow and Icahn are attempting to
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characterize the company's position on this issue as anti-democratic. But, in
fact, the company's position is just the opposite--majority rule for
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shareholders.
Your board believes that the interests of all shareholders must be
paramount and that the voices of all shareholders must be heard. Don't let LeBow
and Icahn take this right away from you.
YOUR BEST CHANCE TO PREVENT LEBOW AND ICAHN FROM EXPLOITING YOUR INVESTMENT IN
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RJR NABISCO IS TO REFUSE TO SIGN OR RETURN ANY OF THE BLUE CONSENT CARDS.
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Your board already is committed to accomplishing a spin-off of Nabisco as
soon as it can be accomplished in a manner that does not jeopardize your
financial interests and is consistent with the company's commitments. CONTRARY
TO WHAT LEBOW AND ICAHN SAY, WE ARE NOT WAITING FOR YOU TO TELL US TO SPIN OFF
NABISCO--WE ALREADY WANT TO ACCOMPLISH THAT.
<PAGE>
For the reasons discussed in this letter and in the accompanying Revocation
of Consent Statement, which we urge you to read carefully, your board has
concluded unanimously that the LeBow/Icahn solicitation is not in your best
financial interests. WE STRONGLY URGE YOU NOT TO SIGN OR RETURN ANY OF THE BLUE
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CONSENT CARDS SENT TO YOU BY THE LEBOW/ICAHN GROUP OR ITS AGENTS, INCLUDING
BROOKE GROUP. WE URGE YOU TO DISCARD ANY BLUE CARDS SENT TO YOU BY THE
LEBOW/ICAHN GROUP.
IF YOU HAVE PREVIOUSLY RETURNED A BLUE CONSENT CARD TO THE LEBOW/ICAHN
GROUP, YOU HAVE EVERY RIGHT TO CHANGE YOUR MIND AND REVOKE YOUR CONSENT BY
SIGNING, DATING AND RETURNING THE ACCOMPANYING YELLOW REVOCATION OF CONSENT
CARD, USING THE ENCLOSED POSTAGE-PAID ENVELOPE. Even if you have not previously
signed or returned a blue consent card to the LeBow/Icahn group, you may sign
and return a YELLOW revocation of consent card to the company, which will have
no legal effect but would assist us in monitoring the progress of the
LeBow/Icahn consent solicitation. If you have any questions or need assistance
in completing the enclosed YELLOW revocation of consent card, please call our
solicitors: MacKenzie Partners, Inc., toll free, at 1-800-322-2885 or D.F. King
& Co., Inc., toll free, at 1-800-290-6430.
Thank you for your support. We will keep you informed as this situation
progresses.
On behalf of the Board of Directors,
/s/ Charles M. Harper /s/ Steven F. Goldstone
CHARLES M. HARPER STEVEN F. GOLDSTONE
Chairman President and
Chief Executive Officer
* No permission has been sought or received to quote from, or refer to,
published materials cited in this letter. The Company has from time to time
obtained investment banking services from certain of the investment banks
referred to herein, including Goldman, Sachs & Co. which among other things
was the lead underwriter in the initial public offering of the Nabisco
shares.
** Mr. Adelman indicated that he had assumed that the spun-off Nabisco shares
would trade at the same prices as the Nabisco shares that are currently
publicly traded and that, after the spin-off of Nabisco, the shares of the
company would trade at a somewhat lower trading multiple than the current
trading multiple, reflecting the value of the company's remaining tobacco
business.
*** Mr. Cohen stated that he did not share the view of some market participants
that the Nabisco shares held by the company were "currently discounted in
the RN valuation equation as a result of indirect tobacco litigation
exposure" and noted that, in any event, contrary to the assertion of the
LeBow/Icahn group, a spin-off of these shares would not remove any perceived
tobacco taint. Mr. Cohen also indicated his belief that after the spin-off,
"the stand-alone tobacco company" would have a dividend of $1.50/share, but
could not support a substantial increase in dividends without potentially
jeopardizing its investment-grade rating and without scaling back tobacco
initiatives, thereby increasing its vulnerability to competitors.
