SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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ss. 240.14a-12
RJR NABISCO HOLDINGS CORP.
(Name of Registrant as Specified in Charter)
HIGH RIVER LIMITED PARTNERSHIP
(Name of Person(s) Filing Proxy Statement if other than
the Registrant)
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<PAGE>
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HIGH RIVER LIMITED PARTNERSHIP
767 Fifth Avenue
47th Floor
New York, NY 10153
212/702-4333-phone
212/750-5807-fax
April 12, 1999
Dear Fellow Shareholder:
As one of the largest shareholders of RJR, I am sure you are as
concerned as I am about the future of our investment. Let us not deceive
ourselves: Tobacco litigation is not going away. Juries, because of recently
released documents, are holding tobacco companies responsible for their
perceived "sins" by awarding large punitive damages. Further, the federal
government is preparing a major claim against the tobacco industry. Bruce Reed,
White House Domestic Policy Advisor, just recently stated that, "...the
Administration is moving full steam ahead."
This does not mean RJR will go bankrupt, but it does mean our stock
price will go nowhere or may seriously deteriorate over the next several years.
The split-up planned by Steve Goldstone will do nothing to ameliorate this
problem. As the current pricing of our stock in the market has already told us,
Mr. Goldstone's method of splitting up the company does not work. If the
Goldstone method is consummated, Nabisco will always sell at a marked discount,
just as it does today. This is due to the market's fear that future litigants
might break through the separate tobacco company veil and attack the stock in
the holding company, even if these companies are separated as the Goldstone
method proposes. Additionally, the market understands that under the Goldstone
method, any hope of a combination of Nabisco with another company will never
come to fruition, because no other company will want to have their P/E ratio
affected by even the faint possibility of tobacco litigation.
If Nabisco were spun off as a tax-free dividend, all these problems
should be rectified. I believe that the only way to build meaningful shareholder
value is to spin off Nabisco. At today's stock market prices, this would mean
RJR shareholders would be receiving a tax-free dividend of Nabisco stock worth
$28 per share. In addition, they would continue to own the tobacco company,
which is generating cash flow of well over $1 billion per year, would be paying
a $1.70 dividend. Today, RJR sells for $24.
<PAGE>
Letter to Shareholder
April 12, 1999
Page two
Management of RJR tells us a spin off would be enjoined - but they are
wrong. Even if a judge issued an injunction (which, in the opinion of expert
legal counsel, would not happen) no plaintiff would post the huge bond necessary
to see the injunction carried through. Such a bond would have to be commensurate
with the financial magnitude of the spinoff approximately $9 billion. I feel
that, if we spun off Nabisco, our investment will be worth close to twice as
much as it is today. My nominees, if elected, are committed to spinning off
Nabisco.
There is absolutely no business reason not to attempt to spin off
Nabisco. But even if management believes, as they claim, that a spin off would
be enjoined, why not try with so much at stake? I believe the real reason is
fear. The Board must be afraid future tobacco claimants may hold them personally
liable for this act. I call on the Board either to spin off Nabisco or to step
aside. I also call on the Board to do nothing irreversible to block the spinoff
of Nabisco before shareholders can have an opportunity to vote on the future of
their investment in the company.
The law firm of Stroock & Stroock & Lavan has issued a 150 page study
entitled, "The Nabisco Spinoff: Civil Liability and the Tobacco Industry."
Additionally, they have informed me that, upon request from the RJR Board, they
will issue an opinion that, based upon the study in its entirety, the spinoff
will not be a fraudulent conveyance. Enclosed is a copy of the study along with
a copy of p.18, the "Conclusion of Executive Summary." Also enclosed is a copy
of the press release I issued today.
I would be very interested to hear your thoughts on this matter. Please
contact me at your earliest possible convenience at 212/702-4333.
Sincerely,
/s/ Carl C. Icahn
Carl C. Icahn
FOR IMMEDIATE RELEASE
ICAHN RECEIVES LEGAL OPINION SUPPORTING NABISCO SPINOFF
New York, NY - Monday, April 12, 1999 - Carl Icahn, who is conducting a proxy
fight against the management of RJR Nabisco, announced today that the law firm
of Stroock & Stroock & Lavan has just completed a 150 page report to his High
River Limited Partnership on, "The Nabisco Spinoff: Civil Liability and the
Tobacco Industry." Stroock & Stroock & Lavan, a nationally recognized firm with
substantial expertise in product liability and fraudulent conveyance analyses,
concluded in the report that a spinoff of RJR's Nabisco unit -- an action that
Mr. Icahn favors as the quickest and best way to build shareholder value in RJR
- - would not constitute a fraudulent conveyance. The report also concluded that
no court injunction would be issued against such a spinoff, assuming plaintiffs
even attempted to obtain one. Regarding an injunction, the report further
stated, "Not only is the legal burden heavy, but that is also the enormous
financial burden requiring that a Tobacco Plaintiff post an injunction bond
commensurate with the financial magnitude of the spinoff - approximately $9
billion."
Additionally, Stroock informed Mr. Icahn that, upon request, they would issue an
opinion to the RJR Board, based upon the report in its entirety, a copy of which
is being filed today with the Securities and Exchange Commission, that a spinoff
of Nabisco would not be a fraudulent conveyance.
Mr. Icahn stated that, if elected, his board would immediately spin off Nabisco.
Mr. Icahn noted that at today's prices, this would mean RJR shareholders would
be receiving a tax-tree dividend of Nabisco stock worth $28 per share. In
addition, they would continue to own the tobacco company, which is generating
cash flow of well over $1 billion per year and would be paying a $1.70 dividend.
Today RJR sells for $24.
Mr. Icahn stated, "Throughout my career I have seen many absurdly undervalued
situations as a result of boards' mistakes and failures to act. But I have never
seen a situation as absurd as this one. It is unconscionable that RJR's Board is
refusing to allow their shareholders to realize the great increase in value that
the Nabisco spinoff would create. I do not understand why RJR's Board refuses to
embrace an action that is so clearly in the interest of their shareholders. The
only reason I can conceive of is fear. The Board must be afraid future tobacco
claimants may hold them personally liable for this act. I call on the Board
either to spin off Nabisco or to step aside. I also call on the Board to do
nothing irreversible to block the spin off of Nabisco before shareholders can
have an opportunity to vote on the future of
their investment in their company."
The participants in the solicitation of proxies are Carl C. Icahn ("Icahn"),
High River Limited Partnership ("High River"), Riverdale LLC ("Riverdale"),
Barberry Corp. ("Barberry"), Meadow Walk Limited Partnership ("Meadow Walk"),
American Real Estate Holding, L.P. ("AREH"), American Real Estate Partners, L.P.
("AREP"), American Property Investors ("API"), Beckton Corp. ("Beckton"), and
Icahn & Co., ("Icahn & Co."), all of which entities are affiliates of Icahn.
High River is the direct beneficial owner of 18,020,800 shares ("Shares") of RJR
Nabisco Holding Corp. ("RJR") common stock. Riverdale is the indirect beneficial
owner of 18,020,800 Shares. Barberry is the indirect beneficial owner of
1,256,700 Shares. Meadow Walk is the direct beneficial owner of 1,256,700
Shares. AREH is the direct beneficial owner of 6,448,200 Shares. Each of AREP,
API and Beckton are indirect beneficial owners of 6,448,200 Shares.
Riverdale, the general partner of High River, is over 99 percent owned by Icahn.
Barberry, the sole general partner of Meadow Walk, is wholly owned by Icahn.
American Property Investors, the general partner of both AREH and AREP, is
wholly owned by Beckton, which is wholly owned by Icahn. As such, Icahn may be
deemed to be the indirect beneficial owner of 25,725,700 Shares.
###
Media Contact: For more information on the report, call:
Walter G. Montgomery Susan Gordon
212.484.6721 212.702.4309
CONCLUSION OF EXECUTIVE SUMMARY
In order to grant an injunction, a plaintiff would have to demonstrate
to a judge that there would be "irreparable harm" to the plaintiff if Nabisco
were spun off. In other words, the plaintiff would have to prove that Holdings
would be rendered insolvent. We conclude in this report that even if over the
next 25 years the claims brought by the federal government, third-party health
care payors and the asbestos companies succeed at the high end of our estimates,
there would still be over $200 billion in profit to satisfy individual claims.
Thus, we believe that no reasonable case can be made for insolvency and,
therefore, the "irreparable harm" allegation fails. But even if the Tobacco
Plaintiffs could convince a court that Reynolds is today insolvent by reason of
tobacco liabilities, they must still prove a fraudulent conveyance. Spinning off
Nabisco would not constitute a fraudulent conveyance because (1) Holdings is not
liable as a tobacco tortfeasor for tobacco-related claims; (2) there is no basis
to pierce the corporate veil between Reynolds and Holdings; and (3) Reynolds was
not insolvent in the past when it upstreamed capital. Based upon this analysis,
we conclude that an injunction would not be granted.
