When barbarians knocked on your door…

$25 billion – that is how much it takes to secure the biggest prize in Wall Street in 1989.

‘Barbarian at the Gate’ is not a computer game as some had mistakenly assumed. It’s a book published in 1990 by investigative journalists Bryan Burrough and John Helyar which depict the leveraged buyout (LBO) of RJR Nabisco in 1989.

The story described the greed and the power hungry of men in the 1980s which followed through Ross Johnson – his origins up to his rise as the CEO of RJR Nabisco, an American conglomerate formed in 1985 as a result of the merger of Nabisco Brands and R.J. Reynolds Tabacco Company. By mid-1980s, RJR Nabisco was sitting on a $1 billion cash flow with a battered stocks performance on Wall Street (due to potential tobacco lawsuit liabilities). The cash pile that the company sitting on began to attract the attention of players in Wall Street – which later eventually became an epic battle.

Whilst the first part of the book described the history of the conglomerate and Johnson’s rise, the later half of the book centers on Johnson and his management’s team attempt to acquire RJR Nabisco. The management team together with Shearson Lehman Hutton announced their proposal to take RJR Nabisco private at $75 a share. The announcement was followed by the entry of Kohlberg Kravis Roberts & Co (‘KKR’) with their team of bankers and advisors at $90 a share, thus setting off a fierce battle for the control of RJR Nabisco.

For Wall Street a $25 billion deal would mean ‘fat’ advisory fees and a raised profile that differentiate themselves among other competitors. This represents a stake – too high to lose for anyone in Wall Street. As all the players circle around RJR Nabisco, an obscene amount of money was raised from junk bonds and PIK notes to fund the deal. As greed and power comes into play, the bidding war raised from ‘take shareholders a ride’ $75 dollar a share to the ultimate final bid from KKR of $109.

Despite the book being published since 1990 (I was never a bookworm during the early part of my life) it is nevertheless a good read for anyone with the appetite for corporate battles. My take - 8 out of 10 for this book.