Business Finance History

Barbarians at the Gate: The Fall of RJR Nabisco (Summary)

by Bryan Burrough and John Helyar

What do Oreo cookies and Camel cigarettes have in common? They funded the biggest, greediest, and most outlandish corporate takeover in history. The battle for RJR Nabisco was so wild it involved a fleet of ten corporate jets nicknamed the 'RJR Air Force,' a CEO whose dog flew on its own private jet, and a staggering $25 billion price tag—all because one man, CEO F. Ross Johnson, thought he could take the company private and instead ignited a war that would define Wall Street's 'Decade of Greed.'

A Company's Executives Can Be Its Worst Enemies

The book reveals how top executives, led by CEO F. Ross Johnson, prioritized their own lavish lifestyles and personal enrichment over the long-term health of the company and the interests of its shareholders.

The most vivid example is the 'RJR Air Force'—a fleet of ten corporate jets used for personal trips, flying sports stars, and even transporting Johnson's dog, Rocco. This blatant misuse of corporate funds showcased the massive disconnect between management's priorities and shareholder value.

Debt Can Be a Weapon of Corporate Conquest

The RJR Nabisco deal wasn't just big; it was the ultimate demonstration of the leveraged buyout (LBO), where a company is acquired using a colossal amount of borrowed money, with the company's own assets used as collateral.

The private equity firm KKR (Kohlberg Kravis Roberts & Co.) ultimately won the bidding war. Their strategy involved borrowing billions of dollars to buy RJR Nabisco, then planning to sell off parts of the company (like the food divisions) to rapidly pay down that massive debt, hoping to profit from the remaining, leaner tobacco business.

Big Deals Are Driven by Ego, Not Just Numbers

The fight for RJR Nabisco quickly devolved from a business transaction into a personal war between powerful Wall Street titans like Henry Kravis, George Roberts, and Ted Forstmann, with F. Ross Johnson caught in the middle.

Ted Forstmann of Forstmann Little & Co. famously railed against the use of 'junk bonds' to finance these massive deals, calling them 'wampum' and 'funny money.' His fierce public rivalry with Henry Kravis of KKR wasn't just about financial strategy; it was a deeply personal and ideological battle for the soul of Wall Street, played out on the front pages of newspapers.

Corporate Battles Have Real-World Casualties

Beyond the billions of dollars and executive drama, the takeover had significant consequences for thousands of employees and the communities where RJR Nabisco operated.

After KKR took control, they immediately began cost-cutting and selling off assets to service the massive debt. This resulted in thousands of layoffs, particularly in RJR's long-time headquarters in Winston-Salem, North Carolina, a city whose identity and economy were deeply intertwined with the company. The deal that made a few people spectacularly rich devastated a local community.

Go deeper into these insights in the full book:
Buy on Amazon
Listen to the full audio book with an Audible Free Trial.
As an Amazon Associate, qualifying purchases help support this site.