American financial system
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1. Do some research into the buyout of RJR Nabisco by KKR (you may want to start by reading a synopsis of the book "Barbarians at the Gate"). Give a brief history. Was this ultimately a financially sound deal? Who benefited from it? Does that justify it? What were the final results and where are the companies today. Finally, was it a good deal or a bad deal from a stockholder or market perspective?
2. In light of certain very unfortunate events such as ENRON how might traditional corporate governance be restructured to prevent such things or is it structured as well as can be (it is just that no system is perfect)?
3. The American financial system is too regulated and its innovation and creativity is being reduced as a result. Agree or disagree with this statement and explain why.
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1. Do some research into the buyout of RJR Nabisco by KKR (you may want to start by reading a synopsis of the book â??Barbarians at the Gateâ?). Give a brief history. Was this ultimately a financially sound deal? Who benefited from it? Does that justify it? What were the final results and where are the companies today. Finally, was it a good deal or a bad deal from a stockholder or market perspective?
The history of the takeover is that F. Ross Johnson was the president of RJR at the time of leveraged buyout and Henry Kravis was a general partners at Kohlberg Kravis Roberts & Co. The leveraged buyout was in the amount of $25 billion and a battler for control took place. RJR management an Shearson Lehman Hutton had originally announced that they would take RJR Nabisco at $ 75 per share but fierce negotiations took place and KKR's final bid was of $109. Since this was a leveraged buyout, the company was saddled with a very high level of debt. This is why it was not a financially sound deal. Many years after the deal, KKR simply sold its assets and continued restructuring in an attempt to pay off the debt. The final result was that in 1999 because of tobacco lawsuit liabilities, the tobacco business was spun off into a separate company and RJR Nabisco was renamed Nabisco Holdings Corporation. Presently Nabisco is a subsidy of Kraft Foods.
After the acquisition of RJR Nabisco, KKR was not able to carry out any leveraged takeover for three years but since has been in the leveraged business. Some of the takeovers have been successful ...
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