Tender-Offer Statement — Third-Party Tender Offer — Schedule 14D-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D1 Borden Acquisition Corp. 6 48K
2: EX-11.(A)(1) Statement re: Computation of Earnings Per Share 133 731K
3: EX-11.(A)(2) Statement re: Computation of Earnings Per Share 14 69K
4: EX-11.(A)(3) Statement re: Computation of Earnings Per Share 2 20K
5: EX-11.(A)(4) Statement re: Computation of Earnings Per Share 3 24K
6: EX-11.(A)(5) Statement re: Computation of Earnings Per Share 3 23K
7: EX-11.(A)(6) Statement re: Computation of Earnings Per Share 5± 22K
8: EX-11.(A)(7) Statement re: Computation of Earnings Per Share 5 35K
9: EX-11.(A)(8) Statement re: Computation of Earnings Per Share 2 16K
10: EX-11.(C)(1) Statement re: Computation of Earnings Per Share 124 273K
11: EX-11.(C)(2) Statement re: Computation of Earnings Per Share 18 70K
12: EX-11.(C)(3) Statement re: Computation of Earnings Per Share 2 17K
13: EX-11.(C)(4) Statement re: Computation of Earnings Per Share 34 71K
14: EX-11.(G)(1) Statement re: Computation of Earnings Per Share 10 32K
23: EX-11.(G)(10) Statement re: Computation of Earnings Per Share 4 23K
24: EX-11.(G)(11) Statement re: Computation of Earnings Per Share 13 35K
25: EX-11.(G)(12) Statement re: Computation of Earnings Per Share 13 33K
26: EX-11.(G)(13) Statement re: Computation of Earnings Per Share 18 47K
27: EX-11.(G)(14) Statement re: Computation of Earnings Per Share 12 35K
28: EX-11.(G)(15) Statement re: Computation of Earnings Per Share 18 49K
29: EX-11.(G)(16) Statement re: Computation of Earnings Per Share 12 36K
30: EX-11.(G)(17) Statement re: Computation of Earnings Per Share 12 32K
31: EX-11.(G)(18) Statement re: Computation of Earnings Per Share 11 30K
32: EX-11.(G)(19) Statement re: Computation of Earnings Per Share 12 32K
15: EX-11.(G)(2) Statement re: Computation of Earnings Per Share 10 32K
33: EX-11.(G)(20) Statement re: Computation of Earnings Per Share 18 49K
34: EX-11.(G)(21) Statement re: Computation of Earnings Per Share 9 27K
35: EX-11.(G)(22) Statement re: Computation of Earnings Per Share 9 32K
16: EX-11.(G)(3) Statement re: Computation of Earnings Per Share 10 32K
17: EX-11.(G)(4) Statement re: Computation of Earnings Per Share 10 32K
18: EX-11.(G)(5) Statement re: Computation of Earnings Per Share 10 32K
19: EX-11.(G)(6) Statement re: Computation of Earnings Per Share 10 32K
20: EX-11.(G)(7) Statement re: Computation of Earnings Per Share 10 32K
21: EX-11.(G)(8) Statement re: Computation of Earnings Per Share 11 32K
22: EX-11.(G)(9) Statement re: Computation of Earnings Per Share 9 31K
EX-11.(G)(4) — Statement re: Computation of Earnings Per Share
Exhibit Table of Contents
EXHIBIT 11(g)(4)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
---------------------------------------X
:
THOMAS M. MALLOY, :
:
Plaintiff, :
:
:
- v.- :
:
H. JOHN GREENIAUS, JAMES W. JOHNSTON, :
CHARLES M. HARPER, HENRY R. KRAVIS, :
PAUL E. RAETHER, GEORGE R. ROBERTS, : C.A. No. 13748
JAMES J. GREENE, JR., SCOTT M. :
STEWART, MICHAEL TOKARZ, SAUL :
FOX, CLIFTON S. ROBBINS and :
KOHLBERG KRAVIS ROBERTS & CO., L.P., :
:
Defendants, :
:
and :
:
RJR NABISCO HOLDINGS CORP., :
:
Nominal Defendant. :
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COMPLAINT
---------
Plaintiff, by and through undersigned counsel, alleges upon information and
belief, except as to paragraph 2, which is alleged on knowledge, as follows:
1. Plaintiff brings this action to redress injuries to RJR Nabisco
Holdings Corp. ("RJR" or the "Company") and its public shareholders which would
result from RJR's acquisition of a 20% interest in Borden Inc. ("Borden") (the
"Purchase") directed by RJR's controlling shareholder, Kohlberg Kravis Roberts &
Co., L.P. ("KKR") after KKR acquires Borden by merger. RJR's proposed
acquisition of an interest in Borden is at an unfairly high price which benefits
KKR at the expense of RJR and its shareholders.
THE PARTIES
-----------
2. Plaintiff Thomas M. Malloy has owned 1500 shares of RJR common stock
since prior to the announcement of the Purchase and the KKR/Borden merger (the
"Merger").
3. Defendant RJR is a Delaware corporation and is an international
company principally engaged in the food and tobacco industries. RJR is a global
leader in the food and tobacco industries with annual sales of over $30 billion.
RJR's wholly-owned subsidiary RJR Nabisco, Inc., is the Company's operating
subsidiary.
4. The following defendants are officers of the Company (the "Management
Defendants") and all were appointed by virtue of KKR's control of RJR's Board
and continue to serve in these extraordinarily lucrative positions at KKR'S
discretion:
a. Defendant Charles M. Harper is an RJR director, and is its
chairman and chief executive officer. For fiscal year 1993, Harper earned over
$2.6 million dollars and acquired stock options for an additional 8.75 million
shares. Harper owns 622,688 shares of RJR stock.
b. Defendant H. John Greeniaus is a director of the Company and the
Chairman and Chief Executive Officer of Nabisco Foods Group. In fiscal 1993,
Greeniaus received over $1.2 million in compensation, $600,000 in restricted
stock awards and 500,000 shares in stock options. Greeniaus owns over 2 million
shares of RJR stock.
c. Defendant James W. Johnston, is an RJR director and the Chairman
and Chief Executive Officer of R. J. Reynolds Tobacco Company. For the 1993
fiscal year, Johnston earned over
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$950,000, received $826,468 in restricted stock awards and options for the
purchase of an additional 500,000 shares. Johnston owns over 2 million shares of
RJR stock.
5. Defendant KKR is a Delaware limited partnership which is engaged in
the investment banking business. As a result of KKR's acquisition of RJR
Nabisco Inc. in 1988, KKR owns approximately 48.9% of RJR common stock. By
virtue of its stock ownership and the fact that eight of RJR's directors are
affiliated with KKR, KKR controls the business and affairs of the Company and
has caused it to enter into the self-dealing transaction described herein.
6. Defendants Henry R. Kravis, Paul E. Raether, George R. Roberts, James
H. Greene, Jr., Scott M. Stewart, Michael Tokarz, Saul Fox and Clifton S.
Robbins are all directors of RJR and executives, general partners and/or limited
partners in KKR. Each of these directors has the ability to control the
business and affairs of RJR by virtue of their membership on the Board and KKR's
ownership of RJR common stock. Defendants named in paragraphs 4 and 6 are
referred to herein as the "Director Defendants".
7. KKR acquired RJR in 1989 and 1990, for approximately $3.2 billion, an
average of approximately $5.60 per share. KKR sold RJR stock to the investing
public in 1991 for $11.25 per share.
FACTS
-----
8. On September 12, 1994, KKR announced that it was purchasing 100% of
Borden in a $2 billion transaction. As announced by the wire services:
3
Columbus, Ohio, Sept. 12 (Bloomberg) --Kohlberg Kravis
Roberts & Co. will trade about $2 billion in stock, or half
its controlling stake in RJR Nabisco Holdings Corp., for all
of troubled food giant Borden Inc., the companies said
today.
KKR, the privately held takeover boutique behind RJR
Nabisco's massive leveraged buyout, said the transaction
values Borden stock at $14.25, a premium of 22.6% over the
closing price of Borden shares on Friday.
Thus, as a result of the merger, KKR will reduce its controlling interest in RJR
by approximately 50%. As stated in the news release "KKR will continue to own
an approximately $2 billion stake in RJR Nabisco, to have significant
representation on the board, and to play an active role in exploring ways to
maximize shareholder value."
9. Also on September 12, RJR announced that following KKR's purchase of
Borden, KKR would sell part of its stake in Borden to RJR for newly issued RJR
shares. Under the arrangement, after KKR acquires 100% of Borden, RJR will
issue approximately $500 million in new RJR common shares to Borden in return
for a 20% stake in Borden. RJR also will receive warrants to purchase an
additional 10% of Borden and have an opportunity to designate a number of
directors to Borden's Board.
10. The agreement for RJR to purchase a 20% stake in Borden is manifestly
unfair to RJR's shareholders. While KKR is obtaining, in the first instance,
100% of Borden for approximately $2 billion, RJR will only receive a 20%
interest in Borden for consideration worth $500 million.
11. KKR, which controls RJR (and will control Borden after the Merger),
proposes charging RJR an exorbitant mark-up of
4
$100 million over what KKR paid for the same 20% interest in Borden. Moreover,
RJR is paying for its Borden stake on the basis of a $14.25 per share price --
which reflects a control premium paid by KKR. As KKR is retaining 80% ownership
of Borden, it is grossly unfair for RJR to pay any control premium for its
Borden stake. Had the defendants acted in good faith and dealt fairly with RJR,
RJR's price per share should be significantly less than the $14.25 per share to
be paid for Borden by KKR.
12. Thus, as the transaction is structured, KKR will effectively pay $1.5
billion for its 80% interest in Borden, and, through Borden, will receive back a
substantial portion of its RJR stock, as a result of RJR's purchase of 20% of
Borden. Moreover, KKR has structured the deal so that it might take advantage of
substantial tax losses associated with its investment in RJR by paying the full
$2 billion price for Borden in RJR stock, while at the same time it will receive
back $500 million in RJR stock as part of the second step of the transaction.
13. Moreover, the issuance of $500 million in new RJR common stock will
substantially dilute the cash value and shareholdings of the non-controlling
public stockholders of RJR.
DERIVATIVE CLAIM
----------------
14. Plaintiff brings the following claim derivatively for the benefit of
RJR.
15. The Purchase serves no corporate interest of RJR, but rather serves to
facilitate KKR's acquisition of Borden while ensuring KKR's continued control of
RJR.
5
16. Moreover, the proposed price of the Purchase grossly overvalues RJR's
proposed 20% interest in Borden for the benefit of KKR and to the detriment of
RJR. It causes RJR to issue its stock for inadequate consideration, thereby
wasting RJR's assets.
17. Demand on RJR's Board of Directors to bring this claim would be futile
and is therefore excused because:
a. RJR's Board is legally incapable of exercising judgment
independent of KKR's interests. Eight of RJR's seventeen Board members (as set
forth in paragraph 6) are also executives, general partners and/or limited
partners of KKR and the three management directors, who are defendants herein,
are dependent upon RJR for their continued employment and compensation. These
defendants, therefore, are not independent and make up a majority of RJR's
Board.
b. For the same reasons, a majority of RJR's directors have an
interest in implementing the Purchase.
c. Corporate waste, involving the overpayment for RJR's proposed
stake in Borden, cannot constitute business judgment.
d. A majority of RJR's directors are responsible for the wrongs
alleged and are named as defendants herein and cannot be expected to sue
themselves.
CLASS ACTION ALLEGATIONS
------------------------
18. Plaintiff brings the following claims individually and as a class
action pursuant to Rule 23 of the Rules of the Court of Chancery on behalf of
all common stockholders of RJR and their successors in interest (other than the
defendants named herein),
6
and those partnerships, corporations, and other entities that have suffered and
will suffer the harm more fully described herein (hereinafter the "Class").
19. The Class is so numerous, that the joinder of all members is
impracticable. As of March 29, 1994, RJR had over 1.1 billion common shares
outstanding. Consequently, the number of Class members is believed to be in the
thousands.
20. Plaintiff's claims are typical of the claims of the Class and
plaintiff will fairly and adequately protect the interests of the other Class
members. Plaintiff has retained counsel who are experienced and competent in
both class and derivative litigation, and the plaintiff has no interests which
are contrary to, or in conflict with, those of the other members of the Class to
be represented.
21. There are questions of law and fact common to the Class including,
inter alia:
----- ----
a. whether the Director Defendants have breached and will continue
to breach the fiduciary duties owed by them to the plaintiff and the Class by
virtue of their participation and/or acquiescence in the conduct complained of
herein;
b. whether the Director Defendants have engaged in self-dealing
transactions which benefit, inter alia, KKR and the KKR investors, at the
----- ----
expense of the shareholders of RJR;
c. whether, in breach of their duties of care and loyalty, the
Director Defendants wrongfully diluted the cash value and voting rights of the
non-controlling shareholders; and
d. whether KKR aided and abetted the Director Defendants' breaches
of fiduciary duty.
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22. The prosecution of separate actions by individual Class members would
create a risk of inconsistent and varying adjudications concerning the subject
matter of this action, which adjudications could establish incompatible
standards of conduct for the defendants in connection with the actions
complained of herein.
23. The defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
CLAIM FOR RELIEF
----------------
24. Plaintiff incorporates the allegations in paragraphs 1 through 13 and
15-16 above as if fully set forth herein.
25. If implemented, the Purchase will result in a dilution of both the
cash value of the public shareholders' interest in RJR and their voting power.
26. Accordingly, the Director Defendants have breached their fiduciary
duties by, inter alia, putting the interests of KKR and its general and limited
----- ----
partners, among others, ahead of the interests of RJR's shareholders generally,
and have used their positions of control as directors of RJR for the purpose of
maximizing the business and financial interests of KKR and its partners, at the
expense of RJR's public shareholders.
27. KKR, as RJR's controlling shareholder, is obligated to deal fairly
with RJR's public shareholders. The Purchase, proposed by KKR to serve its own
interests, breaches that duty.
28. Alternatively, KKR had knowledge of the fiduciary duties owed by the
Director Defendants to the public shareholders
8
of RJR. KKR knowingly and substantially participated in the Director
Defendants' breaches of fiduciary duties as alleged herein.
29. KKR, therefore, is liable to plaintiff and other members of the Class
who have been damaged by the breaches of fiduciary duty.
* * *
30. As to all claims above, plaintiff has no adequate remedy at law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, as follows:
A. An order certifying the individual claims herein as a class action and
designating plaintiff and the undersigned counsel as the representatives
thereof;
B. Declaring and decreeing that the proposed Purchase is a breach of the
fiduciary duties of KKR and the Director Defendants and is therefore unlawful
and unenforceable;
C. Enjoining the defendants from taking any action with respect to
consummating the Purchase;
D. Rescinding, to the extent already implemented, the Purchase or any of
the terms thereof;
E. If all or most of the relief requested above is not granted, a
judgment awarding RJR, plaintiff and the Class compensation for the damages they
sustain as a result of the defendants' unlawful conduct as alleged herein;
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F. A judgment awarding plaintiff's attorneys' fees, and costs of suit,
including expert fees; and
G. Such other and further relief as this Court deems just and proper.
Dated: September 16, 1994
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: ___________________________________
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
Klari Neuwelt, Esquire
LAW OFFICE OF KLARI NEUWELT
950 Third Avenue, 8th Floor
New York, NY 10022
(212) 593-8800
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Dates Referenced Herein and Documents Incorporated by Reference
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