At the start of October, Borden stock was selling at about 84 percent of its earnings growth rate, compared with 120 percent for other food companies.
Under the plan, Borden would issue $240 million of preferred stock, which the company would use to repurchase 14 million shares of Borden common stock.
Borden stock closed yesterday at $13.25, down 12.5 cents, slightly below the value of Kohlberg, Kravis's offer as of yesterday, but substantially below the $17 Mr. Kazarian offered.
Borden stock closed at $13.875 yesterday, down 12.5 cents, on the New York Stock Exchange.
The manager of a large institutional holder of Borden stock, who spoke on condition of anonymity, remarked, "This deal is extremely strange."
The plan is for Borden to find some way to get cash from that stock - perhaps by issuing Borden preferred stock convertible into RJR shares.
It is no wonder that Borden stock rose only 12.5 cents yesterday, to $14.125.
Kohlberg, Kravis, the corporate-takeover specialist, can collect as much as $65 million in cash and $300 million in Borden stock on Friday, whether or not the deal is completed.
Had the market done as badly as Borden stock over the same period, the Dow would be below 1,100.
"It's not a happy situation, any way you look at it," said Robert Monks, a principal of Lens, a Washington-based investment fund that had a $3 million position in Borden stock.