<BREAKFAST WITH THE FOOL>
Thursday, May 20, 1999
"Literature was formerly an art and finance a trade; today it is the reverse." -- Joseph Roux
RJR Frees Nabisco From Suits
Outlining plans for splitting its tobacco and food businesses next month, RJR Nabisco Holdings (NYSE: RN) said in a SEC filing that its tobacco unit will indemnify the new Nabisco Group Holdings from tobacco litigation. Basically, the tobacco business agrees to pay any judgment against Nabisco Holdings. This, in effect, could boost Nabisco's share price, as it significantly reduces the risk of liability. Tobacco companies have been trading at a discount due to concerns about expensive lawsuits.
In the split, RJR Nabisco will be renamed Nabisco Group Holdings, whose primary asset will be its 80.5% interest in Nabisco Holdings Corp. (NYSE: NA). It will change its ticker to "NGH." The remaining 19.5% will continue to trade as Nabisco Holdings under the symbol "NA." Nabisco makes such yummy snacks as Oreo cookies, Chips Ahoy!, Newtons, SnackWells, and Ritz, as well as foods under such brands as Grey Poupon, MilkBone, Planters, and LifeSavers.
The tobacco business, to be called R.J. Reynolds Tobacco Holdings Inc., will be spun off to shareholders on June 14 -- one share of R.J. Reynolds for every three shares of RJR Nabisco -- and trade under the ticker "RJR." R.J. Reynolds, based in Winston-Salem, N.C., makes cigarettes under such brands as Camel, Winston, Salem, and Doral.
The spin-off agreement also spells out efforts to strengthen R.J. Reynolds as a company, reducing the chances of a bankruptcy filing that would make Nabisco Group liable in tobacco suits.
News to Go
Networking firm 3Com Corp. (Nasdaq: COMS) plans to ship its first PalmPilot handheld organizer that will include a wireless Internet link next week. The Palm VII may retail for $599, though the price hasn't been set. 3Com is launching its own Internet service, called Palm.Net, to link Palm users to the Internet. BellSouth (NYSE: BLS) will provide the wireless network for Palm.Net, and Lucent Technologies (NYSE: LU) is making the chip that powers Palm VII.
Speech technology company Lernout & Hauspie (Nasdaq: LHSP) announced it has agreed to acquire substantially all the assets of the Fonix Corp.'s (Nasdaq: FONX) Fonix Healthcare Solutions Group for $24 million in cash, with an additional $4 million earn-out spread over two years based upon performance. L&H expects the transaction to be slightly dilutive this year and accretive next year.
Oklahoma City-based energy and chemical firm Kerr-McGee (NYSE: KMG) said it's reviewing "investment alternatives" related to its investment in Devon Energy (AMEX: DVN). Kerr-McGee holds a 20% stake, or 9.95 million shares, in Devon. In connection with the review, three Kerr-McGee executives have resigned from Devon's board of directors.
U.K. banking group Barclays PLC (NYSE: BCS) announced it will slash 6,000 jobs, or 10% of its workforce in the U.K., this year as part of a restructuring program, which it expects will save the company �200 million ($322.12 million) a year starting next year. The company will take a restructuring charge of �400 million ($640 million) this year.
Earnings to Go:
(Quarterly earnings per share versus that of the same year-earlier quarter and compared with analysts' mean estimate according to First Call. Where noted, earnings exclude one-time charges and gains.)
American Eagle Outfitters (Nasdaq: AEOS) -- fiscal Q1 EPS: $0.25 vs. $0.12 last year; estimate: $0.21
Circus Circus Enterprises (NYSE: CIR) -- fiscal Q1 EPS: $0.43 vs. $0.23 last year; estimate: $0.40
Photronics (Nasdaq: PLAB) -- fiscal Q2 EPS: $0.09 vs. $0.22 last year; estimate: $0.11
Venator Group (NYSE: Z) -- fiscal Q1 EPS: loss of $0.08 vs. loss of $0.04 last year; estimate: loss of $0.09
Wet Seal (Nasdaq: WTSLA) -- fiscal Q1 EPS: $0.34 vs. $0.25 last year; estimate: $0.31
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