The complicated $2 billion deal announced last week would give Kohlberg all of Borden's stock in exchange for about half of the takeover firm's RJR Nabisco Holdings Corp. shares. Kohlberg would then issue 20% of the Borden stock to RJR, and give the tobacco and foods giant rights to another 10%. RJR also would get several seats on Borden's board and be able to exchange its shares for specific Borden assets.
Borden executives said they keep rights to manage the Columbus, Ohio-based company. But analysts predicted RJR and its healthy Nabisco Foods Group would take control eventually.
"Nabisco wouldn't take a 20% interest without that kind of long-term view," said William Leach, an analyst with Donaldson Lufkin & Jenrette, New York.
Late last week, it was reported Paul Kazarian, chief of investment firm Japonica Partners, Providence, R.I., was preparing a rival bid for Borden.
If Kohlberg prevails, the company is expected to sell large chunks of Borden's non-food businesses like wall coverings and chemical products. The beleaguered dairy business, represented by longtime icon Elsie the cow, also could be spun off.
That would leave Borden with a group of niche grocery and snack businesses-including Cracker Jack snacks, Creamette pasta, Wise potato chips and ReaLemon lemon juice-that have some nice synergies with Nabisco Foods Group lines.
"These are not a bad group of products, they've just been poorly managed and they've had no marketing support," Mr. Leach said. "Borden management has been inept, but Nabisco is intelligently handled and well marketed. If the assets move into Nabisco's control, they stand a fighting chance."
Steven Galbraith, an analyst with Sanford C. Bernstein & Co., New York, agreed: "There is value in Borden, if dairy and some of the other businesses can be sold off to give sufficient cash to breathe life into the niche products that really are OK.
"If there are good food assets in there-and I think there are a few-then giving RJR and [Chairman Charles] Harper a crack at them is their chance."
But analysts also saw Kohlberg's move as yet another sign of the vulnerability of tobacco stocks.
"Here's the single biggest insider in the business, saying, `We don't want it,"' Mr. Galbraith said.
Kohlberg said the deal wasn't an attempt to get rid of RJR stock, but a chance "to participate in Borden's future growth while maximizing shareholder value."
A spokeswoman noted Kohlberg will still have a $2 billion stake in RJR.
Nabisco has been on a roll this year, gaining particular prestige for its SnackWell's line of reduced fat cookies and crackers. The overall SnackWell's brand now leads the cookie and cracker category, beating out even Nabisco's Chips Ahoy!, Newtons and Oreo brands, according to Information Resources Inc.
Nabisco's total cookie sales in supermarkets grew 14.7% to $1.4 billion for the 52 weeks ended July 17.
Most of Borden's food business has been spiraling downward, despite a restructuring effort begun in January. The company has managed to sell only a few of the $1 billion in units on the market since then. Second quarter net income plunged 40% to $11.1 million compared with a year earlier, below the company's earning's estimates for the period.
Even if the deal falls through, Kohlberg stands to gain a $20 million advisory fee, plus up to $15 million in expenses from Borden. If a higher bidder takes over Borden, the payment to Kohlberg would include an additional $30 million.
Meanwhile, Borden is struggling along. The company introduces Classico pasta, an upscale imported brand, with two TV spots today via MacNamara, Klein & Solin.
The estimated $3 million campaign is the company's biggest ever for its pasta/sauce business. Borden's lead agencies include Campbell Mithun Esty, Minneapolis and Grey Advertising, New York.
Ira Teinowitz contributed to this story.