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. Last Updated: 07/27/2016

RJR Plans Drastic Breakup




NEW YORK -- RJR Nabisco Holdings Corp., the No. 2 cigarette maker, is selling its international tobacco business for nearly $8 billion to Japan Tobacco Inc. and plans to separate its remaining food and tobacco interests.


The twin announcements Tuesday would mean a breakup of a company that was acquired just over a decade ago for about $25 billion in what was the biggest leveraged buyout to that time.


The company had told analysts last month that it was looking to sell or find a partner for its struggling international tobacco business.


But it came as a surprise that its board also had endorsed a plan for a subsequent spinoff of the domestic tobacco business into a separate company. Its R.J. Reynolds Tobacco division makes Winston, Camels and Salem cigarettes and is second only to Philip Morris Cos. Inc., the maker of Marlboro.


The spinoff would leave RJR Nabisco with an 80.6 percent stake in Nabisco Holdings Corp., which makes products like Oreo cookies, Ritz crackers and Planters nuts.


But analysts have warned that a deal to separate all of the food and tobacco businesses would likely draw legal challenges from people who may have claims over tobacco-related illnesses. The domestic tobacco company was among the four major U.S. tobacco companies that recently settled claims by 46 states for the expense of treating sick smokers by agreeing to pay $206 billion over 25 years.