Not Past It - On Wednesdays We Buy Companies


You’ve probably heard the news that Elon Musk is buying Twitter.

Kinda, maybe it’s the hottest and messiest relationship drama.

This side of Riverdale, Elon Musk and Twitter.

He took to Twitter earlier this year and made an offer the board couldn’t refuse and then the Heat of the Moment musk tweeted.


This one melodramatic message, The Barbarians are at the gate despite what it Seems like this isn’t the name of some Tolkien fantasy novel, it’s a phrase lifted from 1980s Wall Street culture.

A time of Gucci, loafers brick sized cell phones, and Casual cocaine use barbarians is the story of what was at the time, the largest most expensive, nastiest takeover find in the history of Wall Street.


The story has been made into a best-selling book and an extremely soapy made-for-tv movie.

A both called appropriately.

Barbarians at the gate.

Don’t you see?

This is our last chance the bastards are at the city Gates.

Let’s stand at the bridge together.


Let’s stand at the bridge and push the barbarians back.

If you had to tell a child about what this book is about, how would you describe it to them?

Timmy, this is about a bunch of grown-ups with lots and lots of money.


Trying to buy the biggest toy they’ve ever seen.

From gimlet media.

This is not past it a show about the stories.

We can’t quite leave behind every episode.

We take a moment from that very same week in history and tell you the story of how it shaped our world.


I’m Simone palana and in August of 1988, 34 years ago, one charismatic, CEO began to consider an unprecedented decision.

He would go on to put his company, the former food and tobacco conglomerate, RJR, I’ll up for sale, the resulting deal proved once and for all that, the animal kingdom, the high school cafeteria and the boardroom all run by the same set of rules, after the break, a battle between the queen bees and wannabes of Wall Street.


Before we start our story.

I think we’re all going to need a little snack.

How about one of these from our favorite sponsor.

Introducing okay.

Just kidding.

We are not sponsored by Teddy Grahams, a girl can dream, but our story does start with a snack.


Lots of snacks, actually, back in the 1980s, processed food brands, like Chips, Ahoy Wheat Thins.

Saltines Triscuits were all standard issue, lunch?

Snacks and they were all made by the same parent company.

Nabisco Nabisco was run by a Canadian businessman named Ross Johnson who was anything but standard issue.


He was not out of the Harvard Business School mold, whatever that meant be Bryan Burrough.

Was a young business reporter at the time.

For where else, The Wall Street Journal and he went on to co-author, the definitive account of the RJR deal Barbarians at the gate which Has he spent hours with Ross, Johnson?


Ross, for little bracelets.

He had, he wore his hair, kind of longus.

He looks like a tennis pro Ross.

Johnson started out as a roguish somewhat flashy salesman.

He wore open collared shirts, and gold chains that would glimmer on the golf course.


He was one of those men who those people for whom every sentence seemed like it was some type of do.

But the seemingly non-threatening affable Johnson wasn’t as nice as everyone thought he was easygoing.

Not a hint of temper or unpleasantness about he was after all Canadian, but in fact, it was a studied act.


Ross Johnson was no dummy.

When his old company merged with Nabisco, he used his charm with the board and elbowed out the old CEO.

When a Biscoe was acquired by the tobacco giant r.j.

Reynolds Ross, again.

Was named CEO of the new combined company.


But if Johnson was known for being a wolf and fun uncle’s clothing, he had one other perhaps even more defining, characteristic he freaking loved corporate perks.

He was best known for what was called, the RJR Air Force.


It was a small Fleet of planes like 10 or 12 of corporate Jets.

They were always there for Ross and his top guys to go anywhere at any time and they use these Jets like taxis.

It wasn’t just the fleet of jets at his disposal Johnson had access to Swanky.


Corporate Apartments, the company covered his membership to a dozen of the most exclusive, members-only clubs across the u.s. and he also had a habit of keeping b-list celebrities and athletes.

Not only nearby but also on the company payroll o.j.


Simpson was paid 250 thousand dollars a year for appearance’s appearances which he never Actually made. despite all this corporate excess, RJR Nabisco was in a bit of a tough spot, the company represented the combination of two strong, Cash Cow businesses, America’s big cookie and big tobacco and by the late 80s, big tobacco was facing pressure beyond the fight between the tobacco industry and the anti-smoking forces is the incontrovertible evidence that the habit of smoking is in steep decline in North America, RJR Nabisco Was a publicly traded company and that made it vulnerable.


This was a period where people began looking askance at tobacco companies and they began assigning lower values to Tobacco companies based on the fact that the government was almost certainly going to come after tobacco companies in a big way as they eventually did.


Johnson could see this anti-smoking Trend and he was worried for Johnson and CEOs who came of age in the 80s.

It was really almost Lie about your stock price.

If your stock price was low, there’s a good chance.

You could lose your company and your job.


If RJ our stock price fell too, low Outsiders.

Could buy up all that stock and Johnson might lose control of the company, but the company and its eccentric CEO had an unconventional idea, five years and hundreds of millions of dollars in research and development.


Ladies and gentlemen, you stand at the pressure Of a new era in smoking and John premiere.

RJR Nabisco was hard at work on a new allegedly safer kind of cigarette called the premier it would be a huge commercial opportunity for our Jr.


To respond to the anti-smoking messaging bombarding Americans.

It’s big innovation for smokers the premiere with its carbon tip and proprietary flavor, beads would be smokeless and his eagerness to get RJR.


Go stock price up Johnson had the product rushed into Market testing or all the group’s.

We tested the response to Premiere was just about uniform but they all said they tasted like shit like shit.

Shit was the consensus.


Yes, sir.

That was from the TV movie.

We mentioned at the top of the show but it was the real feedback that RJR Nabisco got on the product.

The company halted its testing after less than than a year.

So Johnson went back to the drawing board searching for ways to get his stock price up.


Ross Johnson were ran essentially a Frankenstein’s lab of, you know, you one imagines all sorts of test tubes and everything with dry ice coming of them.

Every one of them, a concoction that would bring them to the promised land of a higher stock price.


Around this time.

Johnson met a frenemy a man by the name of Henry kravis kravis was and a lot of ways.

The very opposite of Ross Johnson.

He was a Wall Street queen bee.

That is the ugliest effing skirt.


I’ve ever seen the Regina George to his Cady Heron.

If you will, although he grew up in Tulsa, Oklahoma you would never know it immaculately tailored suits, an oil back hair.

He attended Northeastern boarding schools and was very much a product of them.


Henry kravis was a founding partner at KKR kohlberg.

Kravis Roberts & Co an investment firm that was on fire in the late 80s.

Henry is a tough guy, he is a hard man.


He was humorless serious focused and seemingly missing a chain of DNA in which, you know, charm is located.

My guess is, you could spend a week in with him in the Hamptons and not here in Life or chuckle me, that was the sense you got.


So one evening and September of 1987 Henry kravis invited Ross Johnson over to his palatial Park Avenue, Apartment Johnson shuffled, past the Renoir, and Monet’s hanging on the wall to join kravis and an Alcove just off of the dining room, they were discussing.


What else?

RJ r–’s lagging stock price?

Henry, kravis could be perhaps helpful with that back in the 60s kravis, his firm had pioneered Profitable little Financial maneuver known as a leveraged buyout lbo.


If you nasty everybody in Wall Street, love the lbo business-y an lbo could make you rich like really French.

It’s the type of thing that could take a mid-tier Investment Bank into, you know, the promised land.


I’m the lb over the concept of really developed to take care of a state problems.

And then it grew from that point in the in the 60s and early 60s.

I’m sorry I’m going to spare you the pain of listening to dry Old Henry kravis explaining an lbo.


Instead we need an explainer for girlies.

Bye girlies.

I’m Haley, AKA mrs.

So Jones and I am a financial pop star.

Haley, sacks runs a very popular Instagram account focused on finance, follow me at mrs.


Dow Jones, if you need help getting Rick Fitch, And she agreed to help explain the lbo concept to us in a way that actually makes sense, private Equity firms by underperforming companies and then they queer eye them remain, just gonna loosen any of the Borgia thing.


It’s Darwin, honey, so they basically do a makeover and then they fell them new and improved for profit, instead of teaching straight guys about roasting cauliflower steaks or finally investing in an electric toothbrush, private equity.

Firms perform a different kind of makeover on public companies, they’ll buy them and then and classic fab five fashion.


They’ll judge them up, maybe they do some restructuring.

Maybe they named a new CEO or trying to cut costs.

Everything they do this in the name of making the company more valuable than it was when they bought it.

But unlike on queer eye the capitals like the money that they use to finance their makeovers doesn’t.


Come from Netflix.

The overwhelming majority of these Acquisitions is financed with death, financed with debt.

That’s just another way of saying, take out a loan and that’s basically what an lbo is.

You borrow money, you buy the company, you should up and sell it for more and this particular case, RJR Nabisco was the sad straight guy that Henry kravis was going to make over so back at Travis is apartment.


He suggests a leveraged buyout.

Simply put he could pull a queer eye with RJR Nabisco.

He would buy it at more than 50 dollars a share giving Johnson and all the other shareholders, a nice little profit, no more fussing with gross, new cigarettes or fretting about the fate of big tobacco, but he just wasn’t interested in an lbo.


He didn’t want any Henry.

Kravis is around telling him what to do or which Priceless antique, vases he could.

Or couldn’t buy for the pilots Lounge of the RJR aircraft.

Hangar, a few days later.

He called kravis and said essentially.

Thanks but no thanks.


But then, according to Bryan, Burrough, the winds changed on Wall Street.

The Fabulous crash of the stock market in 1987 which while awful for you and me and anybody who owned stocks basically created a massive Bargain Basement sale on American corporations.


After the stock market crashed on October, 19, 1987 known as Black Monday.

Stock prices, fell across the board and it was taken companies.

A long time to recover Johnson.

Didn’t want RJR Nabisco to end up in the Bargain Bin, if it did.


He could lose a lot more than his job.

He’d lose his entire way of living the club’s, the cars, the corporate apartments, and the Buckskin suits.

But He remembered that profitable little Financial maneuver that kravis had pitched him.

Ross Johnson came up with the idea that the only way to cast everybody out for everybody to do well was for he and his management team to take our Jr.


Private Johnson was going to do an lbo himself okay this is exactly like that part in Mean Girls when Cady Heron through a house party and invited everyone but Regina George Having a small get-together at my house tomorrow night.


We’re trying to calling now do you think I’m an idiot exactly like that?

Ross Johnson planned to do an lbo but a slightly remixed version called a management buyout, basically Johnson and his executive team would band together work with a bank to secure.


Massive funding and by RJR Nabisco that way Johnson could keep himself on as CEO.

As Johnson himself put it, I don’t want a bunch of nerds telling me whether to take a limo or not, okay?


I am literally always saying that at the next board meeting, Ross Johnson, stood at the head of a t-shaped conference table and Atlanta.


He told the RJ, our board of directors that he wanted to buy the company at $75 per share about 50% higher than its market value in financial news RJR Nabisco.

It’s top managers are offering to buy the company for almost 17 billion dollars.


That would be the largest corporate Takeover in history, but pulling it off, wouldn’t be so simple.

You have to understand the rules here.

When you launch a bid for your own company, it’s called putting the company in play, until the company is in play.


In other words until the company raises its hands and saying we’re for Saito.

It’s considered not kosher to go after them, but If you start this process yourself, everybody and their mother in the world.

Now has the right to go after you and your company.


Ross Johnson was confident, his deal would go through, but he had no idea what or who was coming for him.

Rose Thompson is a tourist on the beach in Bali when there was an earthquake offshore and he looks up in there’s a tidal wave coming at him and he’s about to die.


I mean, well, stones and had no clue.

This was coming after the break.

Henry kravis gets his Mean.

Girls Revenge.


Welcome back, Finance girlies, before the break.

We met Ross Johnson, the charismatic CEO of, RJR Nabisco.

The cookie tobacco Behemoth with the middling stock price.

Less than a year after his fancy dinner with Henry kravis.


The lb O King of New York.

Ross Johnson began secretly preparing.

His own leveraged, buyout of RJR.

He basically put a for sale sign on the front lawn of his company and didn’t expect anyone to show up for the open house alas.


This proved stunningly historically naive of Ross.

That’s author and former Wall Street Journal reporter Bryan Burrough again.

I’m putting RJR Nabisco up for sale presented an opportunity, not just for the people who wanted to buy the company but even for the people who are drafting up the deals, see, it takes a huge team of people to pull one of these off investment bankers to help secure financing an army of lawyers to dot your I’s and cross your t’s and other advisors working for you to make the purchase possible and all that work Hayes.


You got to think of investment bankers, not as Masters of the Universe.

But they are the elves in Santa’s Workshop.

They are the little guys who make leveraged buyout work, why is that appealing because they get paid astronomical sums for everything these little elves don’t just make money when they’re deals.


End up being financially successful, even if the deal ultimately ends up losing money, your army of elves is still probably going to have raked it in.

All in the form of fees.

Coming down to like copies you know if they make copies of perspective for all, I know it costs $150.


I mean the fees for investment bankers on a single deal.

Typically would be north of 10 million, depending on the size of the deal, it became a fabulous business.

For all those who helped make it happen, all those little elves running around, made hundreds of millions of dollars, and the numbers for the RJ, our deal, we’re totally unprecedented at Johnson, Proposed price of $75 per share our joy.


Our was valued at 17 billion dollars, no lbo had ever been made at such a high price.

When the press release announcing the deal went out Wall Street.

Went into a total frenzy, as I said earlier, the all-important board meeting is happening right now.


As we see the barbarians movie dramatized, the real moment.

When news helicopters began circling, the Atlanta skyscraper were Johnson had His office.

It’s the biggest thing in the world.

It’s as if Godzilla is walking down, Park Avenue.


There is no way you can ignore it.

You must react.

You must be part of this deal.

Around 900 miles away in New York City.

Henry kravis was on the phone and his plush corner office crevices.

Secretary rushed into the room and silently passed him.


A note RJ are going private at $75 per share.

Henry Krabs is first reaction, is you son of a bitch.

This is my deal.

Why didn’t you come at me?

You know what I mean?


Oh Henry, kravis hung up the phone and his little elves.

Almost immediately began to work on a competing bid for RJR Nabisco come.

Hell or high water kravis wanted to win.

And there was no way, he’d let some long-haired chain wearing Canadian beat him at his own game.


We Begin tonight with an examination of something hot, the RJR Nabisco case, that’s now on the table, maybe every twist and turn and the ensuing takeover battle, dominated the financial news cycle over the following weeks, Wall Street investment, firm said it will offer to buy RJR Nabisco the tobacco and food company.


For 20 billion, two hundred eighty million dollars.

The offer of came only four days after the managers of RJR Nabisco proposed taking over the company for 17 billion dollars in an effort to contain the Nia are Jr.’s


Decided to set a deadline for all best and final offers for the company, they were due at 5:00 p.m. on Friday, November 18th 1988.


So, essentially 24 hours a day, seven days a week, every skyscraper on Wall Street and you know the attended landscape is awake in shirt sleeves on the phone, trying to make something happen.

The bids were to be dropped off by hand at the office of Skadden, Arps the Midtown Law Firm that was representing our GRS board, which made things tricky for Johnson’s team since they were stationed downtown.


And so at 4:20 p.m. a limo load of investment bankers and lawyers got into a limo with Ross Johnson’s.

Big formal bid, the head up the East Side Highway and of course they get caught in traffic.

Johnson’s team, calls them every five minutes to check on their progress at 4:35.


They’re you know, they’re in traffic.

And, you know there it’s a hard deadline, five minutes later, they’re still in traffic by 4:45.

They break out there on First Avenue there on the phone, the whole way, giving Ross and everybody else, and up an update.


But by 450, they’re completely stuck boxed in at 55th and First Avenue, Still half a mile from their destination.

Ross is downtown saying you subject guns.

They’re gonna reject this.

Don’t, you know, the for attorneys, got out of the car clutching their briefcases and thousands of pages of paperwork and sprinted, all the way to 919 Third Avenue.


And they made it but not before 5:00.

Stumbling into the conference room there at Skadden, Arps with their deal, but it turns out, I didn’t matter, the deadline got pushed on a technicality.


The way you’ve got to think of RJR Nabisco is this a 12-round heavyweight prize fight that went 18 rounds.

It literally went past the final deadline to another deadline.

If it was like a football player who runs through the end zone into the locker room, he just kept going and going after Six, grueling weeks, all the beds were finally in at the final hour, there were three offers on the table, one from Ross Johnson and his management team won from Henry kravis and his firm.


And one, from a third Investment Group, led by the first Boston Corporation, but one of those bidders knew exactly what he was doing.

There was a game being played here on Wall Street for 25 billion dollars in 1988.


Henry kravis knew the rules back and forth.

He had memorized, the rules Ross Johnson had never picked up the rulebook.

The winning bid made by crevices.

Firm was massive, a whopping twenty four point, eight billion dollars or about $109 per share because kravis bought the company at such a high price.


It was going to be incredibly difficult to turn much of a profit, but he got what he really wanted his place at the top of the lbo food chain.

When kravis took control of RJR Nabisco Johnson was out.


But don’t cry for Ross Johnson, he pocketed around 50 million dollars as a result of the Takeover.


His golden parachute landed and upper-crusty, Jupiter Florida or he quietly retired.

At the time the RJR Nabisco lbo was unprecedented but it opened the door to a level of greed even Wall Street hadn’t imagined yet.


Today it’s not uncommon to see lbos of its size or even bigger boom breaking news Elon Musk offering to buy Twitter for fifty four dollars and twenty cents a share.

If Elon Musk buys, Twitter has proposed share price.


He would Buy it at forty four billion dollars big money.

But as we know on the flip side of every lbo is dead, a whole lot of borrowed money that needs to be paid back often that means layoffs, hundreds of thousands of retail workers have lost their jobs in the last 10 years as a result of lbos and when companies can’t pay up, the whole business goes under and everybody loses their job, such was the case.


They’ll be OS of big American retailers.

Like Sears Toys R Us and RadioShack which all ended in bankruptcy.

Basically, it’s a Gamble.

There’s something other than the high-risk high-reward math drawing wall Street’s finest to the lbo like what this Twitter deal, Elon Musk famously has beef with the company and with his portrayal in the media in short, it’s personal.


But hey, that’s Wall, Street are gr.

Showed Wall Street, never changes.

It’s all about fear and greed, and ambition and hubris wall.

It is so much less about the numbers that intimidate you and me and my mom and your dad who do who will never understand this.


It’s about human emotions.

It’s about what people want.

It’s about, you know, how they go about getting the things that they most want in life that will change their lives and RJ.

Are I think 30 years later is still held up as exhibit a of the most naked displays of all those Emotions that many of us can ever recall seeing in American Business.


The world of Finance is always felt incredibly cold and analytical to me, but in reality nothing, no spreadsheet, no, crisp new Patagonia vest can protect you from the torrent of your own emotions and as much as economists, love to think the financiers Among Us are rational, actors.


We are all susceptible to our whims, our feelings, our egos, and that Well that I can understand.

I love a human emotion.

This show about all kinds of episodes from history is all about them.


It’s just that some of us are empowered to the point that our emotions could say shift the face of American industry and that that I have a harder time understanding.


Not passed it as a Spotify original produced by gimlet and DSP media, this episode was produced by Laura Newcomb.

Next week, we’re heading down to SoCal or a community of surfers.

Once clashed with the American Military, and we call them jarheads and was disrespectful.


And there’s a part of you that’s excited that, you know, the right in front of them, you’re doing something, you’re not supposed to be doing, but you’re getting away with it.

The rest of our team.

Our associate producers, Julie Carly and Ramona Philip.

The supervising producer is Erica Morrison editing by Kelly Prime, Andrea be Scott and Zach Stewart Ponte fact-checking, by Jane, Ackerman sound design and mixing by Emma Monger, original music, by Sachs kicks, Ave Willie, Green, Jay bless Bobby Lord.


Our theme song is took Ileana by Coco, Co with music supervision by Liz, Fulton, technical Direction by Zach Schmidt show art by Elysee Harvin and Talia Rahman.

The A producer at CSP media is Zach Stewart, Ponte the executive producer from gimlet as Matt schulze TV.



You heard was from HBO’s 1993.

Barbarians at the gate and the book Barbarians at the gate was co-written by Bryan, Burrough, and John Hillyer special.

Thanks to Jeffrey hook at Johns Hopkins.

Lauren Hirsch at the New York Times, Sam Rao and to Lydia Pole, Green Abbie ruzicka Dan Behar Jen hon, Emily wiedemann, Liz Styles, congratulations on the new kid, Walsh and Joshua Bianchi follow not past it.


Now to listen for free exclusively on Spotify click the little bell next to the follow button to get notifications for new episodes and while you’re there hey why don’t you write as 5 Stars?

You can follow me on Twitter at Simone palana in.

Thanks for Hangin.

We’ll see you next week.

You can take that fake apology and shove it right up your hair.

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