Gene Hoots spent thirty years reflecting on this key event in his life – the 1988 leveraged buyout of his employer of 21 years, R.J. Reynolds. The buyout dislodged him from a comfortable corporate world and sent him down a path that he never saw coming until the last minute.
The RJR Nabisco deal set the high water mark for leveraged buyouts for many years. It also displayed, in a very public way, the corporate excesses of the day and what many saw as unbridled corporate greed. But in a couple of months, the story faded from the headlines of the Wall Street Journal and the Winston-Salem Journal, and the world moved on.
For three decades, Gene Hoots kept the idea in the back of his mind that there was a bigger story that went well beyond the headlines about the buyout. That the story stretched for 70 years and the leveraged buyout was but a single chapter, beginning more than 40 years earlier and continuing for another 30 years after.
What caused the sudden collapse of one of the most profitable companies in the world? Was there a unique set of circumstances for RJR? Was there something about the tobacco industry? What became of the three businesses that comprised the worldwide RJR Empire? And what were the stories of the men and women who worked there, invested in the company, and believed in it like a religion?
Going Down Tobacco Road answers these questions and provides some insights about how other companies, large and small, and individuals as well, can avoid the costly mistakes that wasted billions of dollars by misallocating resources and ignoring sound financial principles.
Part I. The Gold Leaf 1611-1960
A brief history of tobacco in America from Jamestown in 1611 through 1948 in North Carolina. Reasons for North Carolina becoming the dominant tobacco state and the economic impact tobacco had on its economy and people. A description of the early years of R. J. Reynolds Tobacco 1875-1948.
Part II. Empire 1960-1986
An in-depth analysis of RJR’s policies related to tobacco and the eight other industry segments the company owned through acquisition from 1949-1988. The results of those policies, both good and bad, and the final decision that led to the leveraged buyout (LBO).
Part III Barbarians 1977-1989
A discussion of the three groups who attached themselves to RJR as outsiders/Barbarians from 1986-1889. The cultural conflicts that followed and the economic ramifications of the Barbarians’ actions on stockholders, employees, the operating businesses, and the city of Winston-Salem.
Part IV. Dark Ages 1989-1998
A review the destruction caused by the Barbarians on the three businesses they controlled through the LBO. The billions of dollars of cost in financial and personal terms, and the management steps taken to end the misdirection of the companies and set them on a stable, profitable path again.
Part V. Renaissance 1999-2017
A description of the operations of the three basic business R. J. Reynolds Tobacco (US), Tobacco International (Geneva) and Nabisco (NJ). The steps each took to recover from a decade of financial destruction and their ultimate success.
Part VI. The Elephant in the Room – Philip Morris
A brief history of Philip Morris, RJR’s major competitor. A contrast between the history and performance of the two companies with an explanation of why Philip Morris succeeded, and RJR failed.
Part VII. Master Settlement Agreement and Taxes
An analysis of the massive taxes and fees that the tobacco industry generates for other “stakeholders” – federal and state governments, attorneys, farmers, and the medical industry.
Part VIII. Reflections on Times Past
Interviews with RJR employees.