RJR NABISCO TO GET OUT OF TOBACCO SALES; JAPANESE TO BUY CIGARETTE BUSINESS OUTSIDE U.S.

Byline: Skip Wollenberg Associated Press 

RJR Nabisco Holdings Corp., the food and tobacco conglomerate whose brands include Camels and Winstons, Oreo cookies and Ritz crackers, is getting out of the cigarette business.

RJR officials Tuesday said they will sell their international tobacco business to Japan's largest tobacco company and break off domestic tobacco operations into a separate company owned by the same shareholders.

The moves come amid rising legal challenges to cigarettes and falling numbers of U.S. smokers, something tobacco opponents were quick to note.

``The tobacco industry is in deep trouble,'' said Ahron Leichtman, executive director for Citizens for a Tobacco-Free Society, an anti-tobacco group based in Cincinnati.

On the contrary, RJR said its aim is merely to help the cigarette and food companies gain greater success as separate entities, and securities analysts agreed.

John Maxwell, analyst at Davenport & Co., said RJR got a fantastic price for the international business, $7.8 billion. It will use the proceeds to help reduce its $9.1 billion debt, leaving the domestic tobacco company in a better position to compete in the United States, he said.

RJR has been under pressure for several years from some of its major stockholders to separate the businesses in the $17 billion conglomerate so each could rise or fall on its own merits.

Carl Icahn, a onetime corporate raider who holds about 7.7 percent of RJR stock, threatened to launch a fight for control of the board of directors to force a quick separation. Icahn failed to return repeated calls for comment Tuesday. His 25 million shares grew in value slightly as RJR Nabisco stock rose 12.5 cents to $28.75 a share in trading on the New York Stock Exchange. Nabisco Holdings, which trades as a separate stock even though RJR owns 80.6 percent of it, closed up 31.25 cents at $44.9375 a share.

RJR Nabisco was acquired in 1988 by the investment firm Kohlberg, Kravis, Roberts for $25 billion, the biggest corporate buyout of the high-flying 1980s.

RJR plans to sell its international tobacco business to Japan Tobacco Co.

``The deal will allow us to secure a base for future growth overseas and establish us as a global player,'' a Japan Tobacco spokesman said.

The RJR international tobacco business is a distant third to Philip Morris Cos. and British-American Tobacco PLC. Its earnings have fallen amid financial turmoil in its Russian and Asian markets.

After the sale, the RJR board plans to spin off its domestic tobacco operations, R.J. Reynolds Tobacco Co., to RJR shareholders. The tobacco company will keep its name and retain its headquarters in Winston-Salem, N.C.

``We believe that the food and tobacco businesses will be best able to achieve their full potential under separate ownership structures,'' said RJR chairman and chief executive Steven F. Goldstone.

The spinoff would leave RJR Nabisco with an 80.6 percent stake in Nabisco Holdings Corp., the food division that also makes Snackwell's cookies, Life Savers candy, Planters nuts and Chips Ahoy! RJR would change its name to Nabisco Group Holdings.

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PHOTO (Color) Employees leave R.J. Reynolds Tobacco Division's Whitaker Park Plant in Winston-Salem, N.C., Tuesday, the day RJR Nabisco Holdings Corp. announced it will sell its international tobacco business and break off the domestic operation.

Tom Copeland/Associated Press