Tobacco giant R. J. Reynolds Industries Inc. and Heublein Inc., best known for its Smirnoff vodka, Kentucky Fried Chicken and A-1 steak sauce, agreed yesterday to a $1.3 billion merger.
Under the terms of the agreement, Reynolds will acquire 100 percent of Heublein, which, along with Reynolds' Del Monte Corp., will form a new foods and beverages group for Reynolds with annual sales of more than $4 billion.
Reynolds will begin a tender offer Friday for 11.35 million shares or approximately 52 percent of Heublein's outstanding common stock at $63 a share. The company said it will begin paying for the tendered Heublein shares about Aug. 20.
Although Heublein stock did not open for trading until late yesterday afternoon, it soared 8 1/8 to close at $55 3/4. Reynolds traded for only 30 minutes yesterday and fell three points to close at $40.
Reynolds played the role of the white knight in the acquisition. Heublein has been resisting a takeover attempt for the past several months by General Cinema Corp., which has been actively buying chunks of Heublein stock and now owns about 18 percent.
In a separate agreement reached yesterday, Reynolds will acquire four million shares of unissued Heublein treasury stock, or approximately 18.4 percent of the shares outstanding at $63 a share. The move appears designed to ensure that Reynolds can complete the merger no matter what General Cinema does with its Heublein stock, analysts said.
Analysts said the proposed acquisition, which is part of Reynolds' plan to invest in areas oy to diversify into the high margin segment of the food and beverages business was made clear in a meeting with analysts last November.
"I cannot overemphasize to you our intent to carve out our own niche in supplying food to the world market place," Reynolds Chairman Sticht said last fall. "We must produce as much food in the next 40 years as we have in the past 11,000 . . . this is the direction in which we at Reynolds are moving," he said.
Upon completion of the tender offer for 52 percent of Heublein shares, the remaining Heublein shareholders will receive a package consisting of a fraction of a share of Reynolds common stock and a fraction of a share of a new Reynolds straight preferred stock.
The fractional share of common stock will have a value of approximately $31.83, while the fractional share of preferred stock will be worth approximately $25.
Reynolds sales have grown 15 percent annually over the last five years to $11.7 billion before excise taxes in 1981, while earnings increased 17 percent a year to $767.8 million last year.