NEW YORK — RJR Nabisco Inc., trying to stay on track in its ambitious schedule to pare debt from the biggest leveraged buyout in history, said Friday that it will sell its Baby Ruth and Butterfinger candy bar brands to Nestle SA for $370 million.
RJR, a food and tobacco company, said it will close the cash deal for the two candy brands, the Pearson confection business and a Franklin, Ill., plant by year-end.
The president of Nestle Food Corp., C. Alan MacDonald, said the purchase would complement Nestle's other candy bar brands--Nestle's Crunch, Raisinets, Alpine White, Chunk and Bit-O-Honey.
RJR Chairman Louis V. Gerstner Jr. said the sale was a significant step in our overall divestiture program."
RJR placed itself on the auction block a year ago and was acquired in February by Kolhberg Kravis Roberts & Co. for $25 billion.
Since the buyout, it has been generally smooth sailing for RJR. It posted higher operating earnings for the first six months by aggressively cutting costs and trimming its work force by 2,000 people.
So far, its asset sales have mostly been on track. RJR sold its European foods unit in June for $2.5 billion to help pay down a $6-billion bridge loan.
The company owes another $3 billion on that loan by February and will use the proceeds from the Baby Ruth and Butterfinger sale toward it. RJR has said it will also sell its 20% stake in cable television network ESPN and its breakfast cereals unit to help pay off the loan.
RJR is also counting on the successful sale of its Del Monte canned foods unit by year-end to pay off the remainder of the bridge loan.
But rumors surfaced Wednesday that RJR's planned sale of Del Monte for $1.48 billion to Merrill Lynch might fall through. The sale is contingent on Merrill's ability to finance about $350 million of the purchase with high-yield, high-risk bonds, or with a bridge loan.