Reflection – Barbarians at the Gate

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Hipolito, Chelsea Marie Y. STRATMA V24 Barbarians at the Gate The film adaptation of the novel documenting the story of F. Ross Johnson and the fall of RJR Nabisco successfully depicted the events in Wall Street during the 1980’s. Since he was young, Johnson has always been a salesman, as he said so himself, who can sell whatever product. As the chief executive of RJR Nabisco, he has high hopes for the new product they tried to launch — the Premier cigarettes. The results, however, did not reach the expectations that Johnson had envisioned. Out of all the people they tested the product with, only less than 5% approved. The repelling taste and smell of the cigarettes are the corresponding factors that made the majority strongly dislike it. Johnson is known to be impatient in his ventures and knowing that the Premier cigarettes would not increase their stock prices led him to the decision of engaging a leveraged buyout of the company. Backed by the investment banking and brokerage house of Shearson Lehman Hutton Johnson announced plans to buy RJR Nabisco for $17 billion or $75 a share. Since corporate directors were required by law to open the bidding to all comers in order to get the highest price for shareholders, they found competition against other corporate giants including Henry Kravis, a cofounder of the LBO specialist firm of Kohlberg, Kravis, Roberts & Company, whom they lost the bid to. Johnson consulted with Kravis before the whole buyout, however Johnson decided to seek the help of Shearson Lehman and the American Express instead. Kravis, claiming he gave the LBO idea to Johnson, felt somehow betrayed and decided to offer a bid himself. Led by greed, Johnson made secret deals with his bidding partners Shearson Lehman and Solomon, which would give a big piece of the ownership to Johnson himself. The RJR Nabisco board of directors discovered

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