F. Ross Johnson, Who Allowed RJR Nabisco Buyout, DiesBy
F. Ross Johnson, the RJR Nabisco Inc. chief executive officer whose efforts to take the company private in the 1980s led to the then-largest takeover in Wall Street history chronicled in the best-selling book “Barbarians at the Gate,” has died. He was 85.
Johnson died of pneumonia on Thursday at his home in Jupiter, Florida, according to the Wall Street Journal, citing his spokesman.
The Canadian-born businessman triggered the fiercest contest of the leveraged-buyout era in 1988 by attempting a management-led purchase of the maker of Ritz crackers, Oreo cookies and Winston cigarettes. He lost control of the process after making an initial bid of only $75 a share, giving private-equity firm Kohlberg Kravis Roberts & Co. room to woo the company’s board and shareholders with a richer offer. KKR won the battle by paying $109 a share. The $30 billion total cost was the largest amount paid for a corporation at the time.
The six-week bidding war for the company pitted Johnson, backed by Shearson Lehman Hutton Inc., against KKR. As teams of lawyers and advisers entered the fray, Johnson couldn’t even count on the support of his own board, which weighed increasingly higher offers from bidders using junk bonds for their financing.
“Every Wall Street chief was avid to land history’s biggest LBO,” John Helyar, the co-author of “Barbarians at the Gate,” wrote in a Bloomberg column in 2008.
A former accountant who was skilled at marketing, Johnson had more experience selling companies than buying them. He engineered the merger of Standard Brands Inc. with Nabisco Inc. in 1981 and then the $4.9 billion acquisition of Nabisco Brands Inc. by R.J. Reynolds Industries Inc. four years later. In both cases, he eventually ran the newly created company.
The man who famously ferried his pet dog around on corporate jets enjoyed the high life, yet he was seen as ill-equipped to deal with a private-equity war that rendered longstanding friendships irrelevant and greed the only motive.
“Johnson seemed so open, so trusting, so -- how to describe it? -- yes, naive,” Bryan Burrough and Helyar wrote in “Barbarians at the Gate” (1990). “Did he realize the forces he was on the verge of unleashing?”
Kravis tapped Louis Gerstner, president of American Express Co., to become CEO after the deal was concluded, and Johnson departed with a payout that some estimate at more than $50 million. Johnson was featured on a 1988 Time magazine cover headlined “A Game of Greed” and was portrayed by actor James Garner in a 1993 television-movie version of the book.
“Bored with the status quo, Johnson engineered a new and exciting no-lose game for himself,” Michael Lewis wrote in “The Money Culture” (1991). “If he won, he became rich. If he lost, he also became rich, thanks to the golden parachutes his board had approved.”
Frederick Ross Johnson was born on Dec. 13, 1931, in Winnipeg, the largest city in Canada’s Manitoba province, to parents Frederick Johnson and the former Caroline Green.
He earned a bachelor of commerce degree at the University of Manitoba in 1952 and a master’s at the University of Toronto, where he later taught for a few years. Johnson then had jobs as marketing director at Canadian General Electric and as a merchandising manager at retailer T. Eaton Co. in the mid-1960s.
In 1971, he became president of Standard Brands in Toronto, before moving to New York where he took over as CEO of the parent company five years later. After the merger with Nabisco, Johnson became chief operating officer of the combined company, Nabisco Brands Inc., and later took over as CEO when Robert Schaeberle retired. He became CEO of RJR Nabisco in 1987.
After departing the company, he was chairman and CEO of his own investment company, RJM Group Inc., in Atlanta. An avid golf player, Johnson belonged to clubs including Castle Pines Club in Colorado and the Jupiter Hills Club in Florida.
Johnson was married to Laurie Graumann and the couple had two sons, Bruce and Neil, prior to a divorce. He later married Susan Johnson.
— With assistance by Sterling Wong