Barbarians in Hibernation

Long after the RJR Nabisco acquisition fiasco, Bryan Burrough of Barbarians at the Gate revisits the key players in the shenanigans

It has been 20 years. Can you believe it? Just about every major figure on Wall Street went to battle in the greatest takeover fight in U.S. history, the contest for control of giant RJR Nabisco, maker of such staples as Camel and Winston cigarettes, Oreos, and just about every cracker you can think of.

The world has never seen anything quite like it, an epic food fight. Investment houses threw themselves with abandon into the signature conflict of the 1980s. With my co-author John Helyar, I wrote a book about it, Barbarians at the Gate (Collins Business, 1990 original publication; update with a new afterword in 2008), which has just been reissued to mark the deal's anniversary. Even today, with the landscape of Wall Street changed forever, the book holds up pretty well—not only a colorful story of greed gone wild but also a useful primer about the way our greatest financiers do business when they think no one is watching.

For this new edition, John and I sat down with a number of the major players, including RJR's heralded CEO, F. Ross Johnson, who started the whole thing with a wrongheaded scheme to buy the company himself. Ross was holed up in merry retirement on a Florida golf course. He has no regrets, he told us. "Hell," he said in his familiar singsong baritone, "the shareholders, they still love me!" And they probably did, those who cashed out at least.

A Bad Deal from the Start

We found Henry Kravis, the man whose firm, KKR, won the fight, just where we'd left him, on a high floor at 9 W. 57th St., the building where much of the book's action took place. He, too, was the same man, graying at the temples, but not without regrets.

In fact, it's fair to say Kravis and his partner, his cousin George Roberts, wished they had never heard the name RJR Nabisco. The deal went bad from the start, when the company was simply unable to operate beneath its new mountain of acquisition debt. Nabisco crumbled like a stale Chips Ahoy, followed soon after by the proud old R.J. Reynolds tobacco company; More than one lawyer, Kravis recalled, told them to file for bankruptcy.

They didn't: They sold out instead, swapping their shares for shares in another company they controlled, Borden, but it's clear the RJR deal left a mark on KKR's psyche. The worst part, Kravis volunteered, was the title of the book. It took years, he groused, before people stopped calling them "those Barbarians." Shed no tears for Mr. Kravis, however. Today KKR is doing better than ever.

Surviving Nicely

There were other people to track down, the LBO magnate Ted Forstmann, the public relations maven Linda Robinson, plus many more, and all have survived the past 20 years nicely. We asked many of them if they thought the RJR deal had left any lasting legacy, and for the most part they felt it hadn't. Every great American era seems to have its defining moment, and RJR happened to represent that for the 1980s. Who knows? Maybe in another 20 years we'll all be talking about that super new book someone wrote back in 2009 about the falls of Lehman, Merrill, and Bear Stearns.

It has been a thrill to return to some of our old stomping grounds. Today Wall Street is reeling from its misuse of mortgage-based derivative products, much as 20 years ago it reeled from the misuse of junk bonds and associated leverage. Merrill Lynches and Lehmans will rise and fall, but some things about Wall Street will never change, we believe. America's financial markets run not just on capital but also on fear and human greed, which is not a bad thing, and is unlikely to change anytime soon. The Barbarians? Oh, they're still out there, hunkered down in their velvety caves, waiting for the moment to reemerge and trigger a new boom of some kind, followed a few years later, we're willing to wager, by yet another mammoth bust.

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