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SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by registrant / /
Filed by a party other than the registrant /x/ / / Confidential,
for Use of the
Commission Only
Check the appropriate box: (as permitted by
/ / Preliminary consent statement Rule 14a-6(e)(2))
/ / Definitive consent statement
/ / Definitive additional materials
/X/ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RJR NABISCO HOLDINGS CORP.
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(Name of Registrant as Specified in its Charter)
BROOKE GROUP LTD.
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(Name of Person(s) Filing Consent Statement)
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Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/x/ Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid: ____________
(2) Form, schedule or registration statement no.: _____________
(3) Filing party: ____________________
(4) Date filed: _________________
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[LETTERHEAD OF BROOKE GROUP]
November 14, 1995
IT'S TIME TO SPIN OFF NABISCO
To Our Fellow RJR Nabisco Stockholders:
We at Brooke Group Ltd. believe that now is the right time to spin off
Nabisco. We believe that the market value of your and our investment in RJR
Nabisco can be increased by as much as 50% as a result of a spinoff.* The
reasons for a spinoff are compelling.
Freed from the Reynolds tobacco business, Nabisco will be able to shed the
negative impact that the tobacco operations have on the sale of its food
products and improve its consumer image. Similarly, R.J. Reynolds will be freed
from the threat of consumer boycotts and similar initiatives which will allow it
to address more aggressively the spectrum of legal and political issues which
confront the tobacco industry. Responsible corporate Boards of major companies
like AT&T, Sears, ITT and General Motors are separating unrelated businesses to
increase productivity and stockholder value.
The experts tell us that the prospect of enhanced performance translates
into improvement in stock value.
o In an October 13, 1995 research report, Gary Black of Sanford C.
Bernstein & Co., Inc. computed a value of $43 per share of RJR Nabisco
Common Stock--a 60% gain--if Nabisco is spun off and RJR Nabisco's
dividend is increased from the current level of $1.50 per share to
$1.65 per share.
o On September 26, 1995, Diana Temple, a tobacco industry analyst at
Salomon Brothers Inc., calculated a value of $40.40 per share of RJR
Nabisco Common Stock--a 51% gain--for a spinoff of Nabisco, without
an increase in RJR Nabisco's dividend.
o Ronald B. Morrow of Rodman & Renshaw, Inc., an investment research
company, was more optimistic in his September 26, 1995 report to
investors, estimating a value of $60.50 per share for RJR Nabisco
Common Stock--a 126% gain--in a break-up scenario that included a
sale of foreign tobacco operations as well as a spinoff of Nabisco.
RJR Nabisco Chairman Harper, however, is a non-believer. On November 2,
1995, citing unidentified investment bankers retained by RJR Nabisco, Mr. Harper
told Bloomberg Business News that a spinoff of Nabisco would provide only a 5%
to 10% increase in stock value, and that "if we could get two bucks added (to
the current price), we would do that tomorrow--but we will not take
unreasonable risks."
This is not a new tune that Mr. Harper sings. Chairman Harper opposes an
immediate spinoff and instead advocates a policy of endless delay. In the more
measured tones of his November 7, 1995 letter to you, he claims that three
conditions must be satisfied to create stockholder value from a spinoff.
Chairman Harper states: "For a separation to benefit you, it must be tax free,
it must not be delayed by lengthy court proceedings, and it must preserve the
financial integrity of both the food and tobacco businesses." This trilogy also
serves as the centerpiece of RJR Nabisco'spreliminary materials for its
solicitation of revocations of the consent which Brooke Group will be seeking.
(i) Tax-Free Status
The Company concedes in its 1994 annual report that last year's initial
public offering of Nabisco stock was structured "to preserve the option of a
tax-free distribution at some later date, should [the Board] choose to do so."
Nothing the Company has done since then has affected the viability of a spinoff.
In fact, as recently as October 9, 1995, a tobacco industry analyst employed by
one of RJR Nabisco's investment bankers stated in a published report that RJR
Nabisco's management had assured him that "all tax-related preconditions" to a
spinoff of Nabisco "had been addressed."**
(ii) Lengthy Court Proceedings
We understand Mr. Harper's remarks about delay from "years" of court
proceedings as reflecting a fear that plaintiffs in pending tobacco product
liability cases might seek to enjoin the spinoff by alleging that it constitutes
a fraudulent conveyance. This is a scare tactic by Mr. Harper, and an
intellectually dishonest one as well. While challenging the viability of a
spinoff now, because the Company supposedly will become embroiled in protracted
litigation, Mr. Harper suggests that the spinoff will occur at a later time
because the tobacco litigation climate will improve. Any such future improvement
as indicated by Mr. Harper, however, would not only minimize the risk of
litigation over a spinoff implemented at such time, it would also minimize any
remaining litigation over a spinoff today. The "fraudulent conveyance"
litigation that Mr. Harper so fears is entirely dependent upon the underlying
tobacco plaintiffs' claims, and if they weaken or disappear, so too do any
claims of fraudulent conveyance. If Mr. Harper's "prediction" of subsidence in
tobacco litigation is correct, then your and our interests as stockholders are
best served by a spinoff now, so that operating improvements stemming from
separation of the tobacco and food businesses can begin immediately. If his
"prediction" is incorrect, however, you should realize that Mr. Harper has all
but said that he will never authorize the spinoff.
Brooke Group believes that knowledge is a powerful thing, and that the more
you know about the fraudulent conveyance issue, the less credence you'll give to
Mr. Harper's scare tactics. The key element of any potential lawsuit to enjoin
the spinoff would be the allegation that RJR Nabisco either is insolvent or
would be rendered insolvent by the spinoff. A plaintiff seeking an injunction
would have to show a high probability of establishing one or the other of the
foregoing propositions at trial. Management can not possibly believe that the
Company is insolvent or would be rendered insolvent by a spinoff. RJR Nabisco's
1994 annual report contains an unqualified report from its auditors and includes
a statement that management believes that the outcome of all pending litigation
will not have a material adverse effect on RJR Nabisco's financial position.
This statement was recently reiterated in RJR Nabisco's Third Quarter 10-Q,
filed on October 31, 1995.
(iii) Financial Integrity
The financial integrity of the tobacco and food businesses following a
spinoff is not seriously at issue. Despite his warnings and admonitions in this
regard, Mr. Harper does not say that either business would be imperiled by the
spin-off. As a result of the Company's June 1995 debt exchange offer, holding
company debt was reduced by $4 billion, making Nabisco the obligor. As a
consequence, the debt service coverage of the holding company for the remaining
debt was enhanced, and the new Nabisco debtholders now benefit from the quality
of Nabisco's cash flow. Following the exchange of debt, there was no need for
the Company to readopt its anti-spinoff policy. While a strong case can be made
that investment grade ratings would be retained by both the food and tobacco
companies following a spinoff of the food company, we believe that investment
grade ratings are not necessary for either. Enhanced performance of the
separated companies will, in our judgment, further improve the quality of the
debt.
Mr. Harper's recent statements opposing a spinoff are as incredible as his
statement that he doesn't believe ". . . we could get two bucks added (to the
current price) . . ." from a spinoff of Nabisco. Despite Chairman Harper's
claims, we feel an immediate spinoff would unlock stockholder value. RJR
Nabisco's stock price has suffered, dragged down not only by investors' concerns
about potential tobacco liabilities and possible government regulation of the
tobacco industry, but also because of slowing revenues from the Company's
domestic cigarette business and declining profits from its international
operations. Rather than addressing its problems forthrightly by separating the
tobacco and food businesses, the Company has resorted repeatedly to
half-measures and quick fixes. Recently, the Board put John Greeniaus, the head
of Nabisco, in charge of its faltering tobacco business. The Board is diluting
his attention and impact, and impractically trying to meld unrelated businesses.
Nabisco's current earnings have slipped below expectations. Most recently, the
Company announced that we can expect poor performance for the rest of 1995 and
through 1996.
Now, the Board is asking you to wait at least two to four years or more for
a possible spinoff. A great American humorist, Ambrose Bierce, defined a year as
"a period of 365 days of disappointments." He noted, however, that "the
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future" is "that period of time in which our affairs prosper, our friends are
true and our happiness is assured." After telling us to expect another year or
more of disappointing results, the Company is selling us a rosy future. Who
among us believes that the problems of the tobacco industry will diminish
sufficiently over time to allay Mr. Harper's concerns?
In the face of mounting evidence that its business strategy has failed, the
Board apparently is no longer willing to let stockholders' voices be heard.
Recently, the Board secretly took away the stockholders' right to call a special
meeting and imposed burdensome new conditions on the stockholders' right to act
by written consent without a meeting. Until Brooke Group announced its intention
to proceed with this solicitation, the RJR Nabisco Board had maintained that
there was no discernible stockholder interest in a spinoff of Nabisco. Mr.
Harper now concedes that there is overwhelming interest, and that a majority of
the stockholders want a Nabisco spinoff. Mr. Harper says, however, that only the
Board can determine when the time is right to do the spinoff, and that now is
not that time.
In their November 7, 1995 letter to you, Mr. Harper and the Board have
resorted to mud-slinging and personal attacks, in an effort to deflect your
attention from the real issues--stockholder value. We think it is disgraceful,
and insulting to the RJR Nabisco stockholders, for the Board to presume that the
stockholders will be swayed by name-calling and personal attacks, rather than by
substantive discussion of the issues regarding the Company's performance and the
spinoff.
The accusations which have been made about Brooke Group and Messrs. LeBow
and Icahn are neither correct nor fair--and they are beside the point: we will
terminate our solicitation and walk away if the Company unequivocally commits to
effect an immediate spinoff. We and our affiliates hold a major position in RJR
Nabisco stock. Our group has joined with High River Limited Partnership, an
entity owned by Carl C. Icahn, who is also dissatisfied with the Company's
performance and business strategy. Our joint group holds approximately 13
million shares, approximately 4.8% of the Company's outstanding stock, and based
on available information, the group represents the third largest share
ownership. Brooke Group has no economic interest in the proposals we will be
asking you to adopt, other than through its ownership of the Company's stock.
Both Brooke Group and High River have pledged not to accept any form of
greenmail from RJR Nabisco during the solicitation of consents with respect to
the proposals. We will be proposing a slate of Directors for the annual meeting
next year to facilitate implementation of a spinoff resolution--if the Board
does not effect an immediate spinoff. The Company's by-laws require us to
propose a slate by November 21, 1995 and we will be doing so to avoid losing any
rights. However, if the Company unequivocally commits to effect a spinoff
immediately, we will happily terminate our solicitation of stockholders.
We believe that now is the right time to spin off Nabisco. Accordingly, we
have filed materials with the Securities and Exchange Commission for a
solicitation of stockholders. After our material has been reviewed by the
Commission, we will write to you again and include a consent form for you to
sign. We are not asking you to take action at this time. We may be in touch with
you again to keep you up to date. When we are cleared by the Commission, we will
ask for your vote and we will give you the latest information at that time.
Thank you for your consideration. Very truly yours,
[SIGNATURE CUT TO COME]
Bennett S. LeBow
Chairman of the Board, President
and Chief Executive Officer
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CERTAIN ADDITIONAL INFORMATION: Brooke Group Ltd. ("Brooke Group") will be
soliciting consents for the proposals. The following persons may be deemed to be
participants in the solicitation by Brooke Group: Brooke Group, BGLS Inc.
("BGLS"), Bennett S. LeBow, Andrew E. Balog, Marc N. Bell, Robert J. Eide, Karen
Eisenbud, J. Bryant Kirkland, III, Richard J. Lampen, Howard M. Lorber, Robert
M. Lundgren, Jeffrey S. Podell and Gerald E. Sauter. Brooke Group beneficially
owns 100% of the outstanding stock of BGLS, which beneficially owns 100% of the
outstanding stock of Liggett. Liggett beneficially owns 200 shares of RJR
Nabisco Common Stock. In addition, BGLS directly and indirectly owns 650,869
Class A Senior Preferred Shares, 250,885 Class B Preferred Shares and 79,794,229
Common Shares, or approximately 58% of the outstanding Class A Senior Preferred
Shares, 9% of the Class B Preferred Shares and 42% of the Common Shares, of New
Valley Corporation, which beneficially owns 4,892,550 shares of RJR Nabisco
Common Stock, or approximately 1.8% of the outstanding RJR Nabisco Common Stock.
Bennett S. LeBow, who is the Chairman of the Board, President and Chief
Executive Officer of Brooke Group and of BGLS, may be deemed to be the
beneficial owner of 10,521,208 shares of common stock of Brooke Group, or
approximately 56.8% of Brooke Group's outstanding common stock, and thus may be
deemed to control Brooke Group. Mr. Lampen currently beneficially owns 2,000
shares of RJR Nabisco Common Stock. To the best of Brooke Group's knowledge,
none of the other persons who may be deemed participants currently own any
shares of RJR Nabisco stock.
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* Note: This estimate is based on published research reports by respected
stock market analysts. Estimates of this kind are, by their nature, highly
subjective and are influenced heavily by the assumptions used. This
estimate is not a forecast by Brooke Group of the future trading value of
any securities, and no assurance can be given that the values actually
achieved in a spinoff would be the same as this or other estimates referred
to in this letter. Reference should be made to Brooke Group's Preliminary
Solicitation Statement publicly filed with the Securities and Exchange
Commission on November 6, 1995 for further information with respect to
Brooke Group's solicitation and the analyses by stock market professionals
of the value of a spinoff to RJR Nabisco's stockholders. No permission has
been sought or received to quote from, or refer to, published materials
cited in this letter.
** The tobacco analyst referred to in the text is Marc Cohen, who is employed
by Goldman, Sachs & Co.