In 1999, due to concerns about tobacco lawsuit liabilities, the tobacco business was spun off into a separate company, and RJR Nabisco was renamed Nabisco Holdings Corporation. The European Community and twenty-six of its member states had been investigating major tobacco companies for their role in cigarette trafficking and money laundering into and through Europe. A surprise tentative offer of $23.8 billion to. The second stage, termed the "Merger", is designed to acquire the remaining 26% of RJR Nabisco's outstanding common stock. After being acquired by R.J. Reynolds in 1985 and becoming part of RJR Nabisco, Nabisco was sold in 2000 to Philip Morris Companies (renamed Altria Group, Inc.), which was the parent company of Kraft Foods. See Brief for Petitioner, RJR Nabisco at 15-18. Nov. 4: Forstmann Little indicates it might join the battle with a higher bid. Nov. 18: RJR Nabisco management and Kohlberg, Kravis deliver bids before the 5 P.M. deadline of $22.7 billion and $21.3 billion, respectively. Since it will no longer own any part of the tobacco company, it will be renamed Nabisco Group Holdings. This is a digitized version of an article from The Timess print archive, before the start of online publication in 1996. Oct. 25: Shearson and Kohlberg, Kravis consider a combined bid. For the bid they must be aware of the sources of finance as well so that they will be aware that whether they are able to pay us or not. The National Biscuit Company was formed in 1898 when the American Biscuit Company merged with the New York Biscuit Company. Tobacco is, in effect, valued at nothing. Nabisco, in full National Biscuit Company, former U.S. snack food and bakery product company. It ended at the end of the year when KKR won the bidding war with a $ 109 per share offer and took RJR Nabisco private. Nov. 19: Potential buyers spend the day explaining their complex bids to the company. Rjr Nabisco Case Summary. So far that looks like a doubtful investment at best. Punitive taxes pushed companies to keep cash and fi. Better known as Nabisco, it went on to introduce a number of popular consumer brands such as Oreo cookies (1912) and Ritz crackers (1934). 6 What happened to the former headquarters of Nabisco? Fair Market Value Fair Market Value: "the price at which the asset would trade between two rational individuals, each in command of all of the information necessary to value the asset, and neither under any pressure to trade." Rocky Higgins Analysis for Financial Management (p . Local events. : 15-138. CITATION: 579 US (2016) GRANTED: Oct 01, 2015. Philip Morris acquires Nabisco. January 2, 1989 (FORTUNE Magazine) - IT BEGAN with a golf game and ended when F. Ross Johnson and his management team at RJR Nabisco three-putted the biggest buyout in history. RJR Nabisco Some genius invented the Oreo. Oct. 24: Kohlberg, Kravis, Roberts & Company, Wall Street's leader in leveraged buyouts, tops the record bid with a $20.43 billion offer. Nov. 30: Kohlberg, Kravis claims victory for the staggering price of $24.88 billion, or $109 a share. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. Frederick Ross Johnson, CEO of RJR Nabisco, announced a $17 million leveraged buyout of. Nabisco's brands were thereafter marketed by Kraft. 1985 Nabisco Brands merges with R.J. Reynolds. While every effort has been made to follow citation style rules, there may be some discrepancies. RJR Nabisco's outstanding common stock. Are Nabisco and Christie the same company? [5] Later, RJR Nabisco's Planters-Life Savers Division moved to the former headquarters building.[7]. Necessary cookies are absolutely essential for the website to function properly. Conglomerates become a popular structure after the war and up to 1980 or so. And in June, RJR officially separated from Nabisco, cutting the final tie to a business strategy begun more than 30 years ago, when the company began plowing its profits into businesses other than . Some specifics for the exit was: 1st exchange with Borden: 238 million shares of RJR for 69.5% of Borden RJR IPO: 19.9% or 51.75 million shares @ $24.5/share 2nd exchange with Borden: 119 million RJR shares for remaining shares of Borden LBO firm, KKR acquired RJR Nabisco for $25 billion for one the largest leveraged buyouts in U.S. history and ousted Johnson as CEO. In 1988 RJR Nabisco was purchased by Kohlberg Kravis Roberts & Co. in what was at the time the largest leveraged buyout in history. Hence, the discounted cash flows for the 10th year include the [5] [6] This website uses cookies to improve your experience while you navigate through the website. Shareholders of the current RJR Nabisco will get the shares in that operation. In 1995, with RJR Nabisco struggling, Kohlberg Kravis unloaded its stake, but not for cash. Rays place Nick Anderson on outright waivers to clear roster space, St. Petersburg police hope TV show, $25K reward will help lead to suspect in killing, USF football coach Jeff Scott fired after three seasons, Pasco man arrested for selling pipe bomb to undercover cop in FBI sting, officials say, First look at how Rays may address offseason changes, Clearwater auto loan company to lay off 137 after defaulting on credit, The Factory, St. Pete at risk of foreclosure, but it remains open, Mirror, mirror on the wall, why Is Congress worst of all? The losers include R.J. Reynolds and Nabisco, which almost certainly would have been more vigorous competitors had they not been saddled with more than $25-billion in debt from the buyout. RJR Nabisco was formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company. It became RJR Nabisco on April 25, 1986 after the companys $4.9 billion purchase of Nabisco Brands Inc. in 1985. 136 S. Ct. 2090 (2016). In 1992, RJR Nabisco, the parent of R.J. Reynolds paid hundreds of investors from 7.5 cents to $8 a share to drop their securities fraud lawsuits stemming from the leveraged buyout. How do I get to the Temple of Time in Twilight Princess? BRIEFING: Nabisco Sells India, Pakistan Units", "British Conglomerate to Buy Part of Del Monte From RJR", "RJR Sells Del Monte Operations for $1.4 Billion: Deal Puts Company Close to Lenders' February, 1990, Debt-Reduction Goal", "Cigarette Maker Cuts Off Agency That Made Smoking-Ban TV Ads", "How America's biggest law firm drives global wealth into tax havens - ICIJ", https://en.wikipedia.org/w/index.php?title=RJR_Nabisco&oldid=1118642558, Creative Commons Attribution-ShareAlike License 3.0, Associated Biscuits International (consisting of 38% of India's Britannia and 40% of Pakistan's, This page was last edited on 28 October 2022, at 03:16. After being acquired by R.J. Reynolds . DECIDED BY: Roberts Court (2016- ) LOWER COURT: United States Court of Appeals for the Second Circuit. RJR Nabisco was an American conglomerate based in the United States in Midtown Manhattan, New York. The amortization of goodwill of $338 million per year is from the proposed acquisition of RJR Nabisco at $22.9 billion which had the book value of $7.4 billion at the end of 1988. Floyd Norris writes for the New York Times. The origins of Nabisco, however, date back to the formation of the National Biscuit Company at the end of the 19th century. After ruling out New York City and Dallas, the company decided on Atlanta because it was "nouveau riche and overbuilt". Now RJR Nabisco will sell its international tobacco business for $8-billion to Japan Tobacco. Today I'll be talking about one of the most notorious leveraged buy-outs of all time: KKR's $25b LBO of RJR Nabisco. What happened to the former headquarters of Nabisco? "The story is what happens when you really overpay for a company, and the debt levels are just too high," said Stephen F. Goldstone, who will be the last person to hold the job of chairman and chief executive of RJR Nabisco. R. J. Reynolds Tobacco Company was founded in Winston-Salem, North Carolina, in 1875 and changed its name to R. J. Reynolds Industries, Inc. in 1970. Then the domestic tobacco business will be spun off into a separate company, with just $1-billion of debt. Answer: It was a conglomerate (big company with multiple unrelated lines of business) whose market value did not reflect the sum of the value of the constituent parts. This cookie is set by GDPR Cookie Consent plugin. At the pre-bid operation strategy, the company was valued at $17 billion. It is a sad saga for almost all involved. Oreo factory shutdown: Mondelez to close N.J. Nabisco plant . Let me set the scene: we're deep into the 1980s, where low-interest rates, deregulation and globalisation have led to a swelling of buyouts, corporate activity and general capitalistic excess. These cookies will be stored in your browser only with your consent. This True Greed What Really Happened In The Battle For Rjr Nabisco, as one of the most energetic sellers here will unconditionally be among the best options to review. [9] Johnson received compensation worth more than $60 million from the buyout, then left in February 1989. But opting out of some of these cookies may affect your browsing experience. Updates? See Nabisco; R.J. Reynolds Tobacco. In 2000, Philip Morris bought Nabisco Holdings. Adopting the going concern principle, it is assumed that RJR Nabisco will continue to function profitably in the future. KKR was the ultimate winner of a contentious battle for RJR Nabisco after competing against an array of other bidders. [] The Leveraged Buyout of Rjr Nabisco. December 31, 2016, 12:11 PM. THREATS: Following points can be identified as a threat to company: Company's facing obstacles. In what was the biggest merger of its time, RJR Nabisco became privately owned in 1989 when it was merged into investment firm Kohlberg Kravis Roberts & Co. Nabisco and Reynolds became independent with the 1999 spin-off of R.J. Reynolds shares. The Hong Kong University of Science and Technology. However, you may visit "Cookie Settings" to provide a controlled consent. LOCATION:United States District Court for the Eastern District of New York. This cookie is set by GDPR Cookie Consent plugin. A surprise tentative offer of $23.8 billion to $26.8 billion comes from group led by First Boston, which is aligned with the Pritzker family of Chicago. View 15.434+RJR.pdf from MANAGEMENT STRATEGIC at Massachusetts Institute of Technology. Our editors will review what youve submitted and determine whether to revise the article. It was formed In the year 1985 by the merger of Nabisco Brands and R J Reynolds Tobacco Company. 15.434 ACF RJR Nabisco MIT Sloan School of Management Egor Matveyev 1 Outline 1. R.J. Reynolds will also be independent, with a smaller market share in this country and an international business that had to be sold to pay debt taken on in one of the most misguided deals in Wall Street history. N/A. In 1988 RJR Nabisco was purchased by Kohlberg Kravis Roberts & Co. in what was at the time the largest leveraged buyout in history. The RJR Nabisco should select the highest bid by considering the easy payment method. 6 best consumer staple dividend stocks. He was 85. RJR Nabisco stopped operating as a single entity in 1999; however, both RJR (as R.J. Reynolds Tobacco) and Nabisco (now part of Mondelz) still exist. Consumer Staples Avg Yield. LBOs in brief 2. Is RJR Nabisco a publicly traded company? After being acquired by R.J. Reynolds in 1985 and becoming part of RJR Nabisco, Nabisco was sold in 2000 to Philip Morris Companies (renamed Altria Group, Inc.), which was the parent company of Kraft Foods. In earlier years the company was called N.B.C. RJR Nabisco was formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company. But as the former parent of the tobacco company, it will also be burdened with the possibility of residual liability if lawsuits manage to bankrupt the tobacco company. In the meantime, RJR Nabisco was in the doldrums. NEW YORK, OCT. 20 -- Top executives at RJR Nabisco Inc. are developing a $17 billion takeover offer for the food and tobacco giant, a deal that would use a record amount of debt to complete the. [2] View Lecture8_RJR Nabisco.pdf from FINA FINA-512 at The Hong Kong University of Science and Technology. The discount between those two prices will show just how scared investors are of tobacco litigation. Their. happened to corporate America and Wall Street in the 1980's." New York Times Book Review A #1 New York Times bestseller and arguably the best business narrative ever written, Barbarians at the Gate is the classic account of the fall of RJR Nabisco. GDP growth for the US). DOCKET NO. Tobacco litigation proved to be a significant threat. Once put in play by Shearson Lehman Hutton and RJR management, almost every major Wall Street firm involved in M&A launched frenzied, literal last-minute bids in a fog of incomplete or misleading information. We're just living off of the inheritance. To preserve these articles as they originally appeared, The Times does not alter, edit or update them. The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". RJR Nabisco, Inc., former conglomerate corporation formed by the merger in 1985 of R.J. Reynolds Industries, Inc. RJR Nabisco will remain a holding company, with its sole asset the 80.6 percent of Nabisco that it now owns. Nov. 29: Three suitors submit final bids of more than $100 a share. fPresent Value To figure out the value per share of RJR Nabisco to the CURRENT shareholders, consider the pre-bid valuation: Total Assets = 22,607 Current Debt = 5,204 Equity = 17,403 17,403 PerShare 70.34 247 .4 fValuation Like Stanley Kubrick and Joe DiMaggio, RJR Nabisco died this week. On June 20, 2016, the U.S. Supreme Court decided RJR Nabisco, Inc. v.The European Community (RJR). That money, after taxes, will go to pay debt. The European Community. Mr. Johnson's group char, See the article in its original context from. [7], On April 27, 1989, RJR Nabisco announced it would move its headquarters to the New York City area.[10]. This was despite the agency only being contracted for Nabisco products, not any tobacco products. Time Magazine featured Johnson on the cover of its December 1988 issue along with the headline "A Game of Greed: This man could pocket $100 million from the largest corporate takeover in history. Stock rises $1.25, to $85 a share. RJR Nabisco, Inc., was an American conglomerate, selling tobacco and food products, headquartered in the Calyon Building in Midtown Manhattan, New York City. The parent company became Nabisco Group Holdings and owned 80.5 percent of Nabisco Holdings. 0 yrs. - Fifteen years ago this fall, the barbarians of Wall Street stormed the gates of RJR Nabisco, vying to buy the world's No. Financing for that offer is uncertain. Step 1 - Establish a sense of urgency. What happened Nabisco? On December 11, 2000, R.J. Reynolds Tobacco Holdings, Inc. acquired its former parent company, Nabisco Group Holdings Corp., in a transaction that netted RJR $1.6 billion in cash. The nation's largest cigarette . A fierce series of negotiations and proposals ensued which involved nearly all of the major private equity players of the day, including Morgan Stanley, Goldman Sachs, Salomon Brothers, First Boston, Wasserstein Perella & Co., Forstmann Little, Shearson Lehman Hutton, and Merrill Lynch. F. Ross Johnson. When the RJR Nabisco buyout happened many factors were in play from the two competitors in play to buy the company first was Ross Johnson's management, a group who had originally come to the table with a 75 dollars a share offer. Oct. 26: Competition heats up as a joint deal is rejected. Soon after that, R. J. Reynolds Tobacco Holdings, Inc., first traded in June 1999, announced the acquisition of Nabisco Group Holdings. One difference was that Philip Morris had enough financial flexibility to invest in promoting its products, including Marlboro cigarettes and Maxwell House Coffee, while debt-ridden RJR Nabisco was forced to cut back on promotional spending for Winstons and Oreos. The cookies is used to store the user consent for the cookies in the category "Necessary". In requiring domestic injury for private cases under the Racketeer Influenced and Corrupt Organizations Act 6 6. Kolhberg, Kravis begins its tender offer for $90 a share. TN-13 Summary of values of the three different RJR Nabisco plans using after tax adjusted discount rates (millions of dollar 1989 1990 1991 Valuing the cash flows to capital under the prebid plan (interest tax shield in WACC) Cash Flows Available for 517 948 1399 Capital Payments (f) 384 437 457 After tax cash interest Cash Flows Available for . Bidens alliance with the left has worked, but will it last? In 1988 RJR Nabisco was purchased by Kohlberg Kravis Roberts & Co. in what was at the time the largest leveraged buyout in history. The original merger between R.J. Reynolds and Nabisco in 1985 was intended to enhance the tobacco companys increasingly negative image. The Court reached this conclusion because some, but not all . [22], Bozman, Jean S. "Nabisco seeking DBMS to enhance connectivity. [7] On January 15, 1987, the RJR Nabisco board approved a headquarters move from Winston-Salem to Cobb County, Georgia, north of Atlanta, where the company had rented space. In March 1999, RJR Nabisco announced the sale of the international division of R. J. Reynolds Tobacco, and in June of that year, the company sold the remainder of R. J. Reynolds Tobacco to stockholders. N/A. Mergers & Acquisitions RJR Nabisco John Nash Spring 2021 Background I I RJR Nabisco was formed. 18 U.S.C. In a more just world, the investment banks that made hundreds of millions from the RJR Nabisco buyout might now join in the suffering. The cookie is used to store the user consent for the cookies in the category "Analytics". https://www.nytimes.com/1988/12/02/business/history-of-the-rjr-nabisco-takeover.html. KKR's final bid of $109, while a lower dollar figure, was ultimately accepted by the board of directors. PETITIONER:RJR Nabisco, Inc., et al. Nabisco was an American conglomerate selling tobacco and food products. When all that is done, things will be almost back to where they were in 1985, before R.J. Reynolds acquired Nabisco. KKR got rid of their RJR shares by exchanging them with that of Borden Inc when they took that over. The cookie is used to store the user consent for the cookies in the category "Other. The company was valued at different prices in relation to the pre-bid, management group and KKR operation strategies. Ross Johnson was the President and CEO of RJR Nabisco at the time of the leveraged buyout and Henry Kravis was the managing partner at Kohlberg Kravis Roberts & Co. Stock price jumps $1.875, to $90.875. Why is RJR Marked by brazen displays of ego not seen in American business for decades, it became the high point of a new gilded age and its repercussions are still being felt. The RJR Nabisco Company passed trough some amazing facts of its financial life in the years of operating, starting as a tobacco company in 1875. Associate editor. This represents the total value of RJR Nabisco (ASSETS). ", Eleni Chamis, "Breakup Dismantles the 1985 Union of Two 100-Year-Old Companies,", Barbarians at the Gate: The Fall of RJR Nabisco, "RJR Nabisco Headquarters to Move to New York Area", "5 RJR Units Sold for $2.5 Billion - NYTimes.com", "Pepsico, to Aid Europe Sales, Buys 2 British Snack Units - NYTimes.com", "P.M. RJR Nabisco, Inc., former conglomerate corporation formed by the merger in 1985 of R.J. Reynolds Industries, Inc. (a diversified company specializing in tobacco and food products), and Nabisco Brands, Inc., an international manufacturer of snack foods. Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Johnson's unprecedented golden parachute deal. Shareholders of the current RJR Nabisco will get the shares in that operation. NEW YORK (AP) F. Ross Johnson, the former RJR Nabisco CEO depicted as the epitome of corporate greed in the best-selling book and movie "Barbarians at the Gate . Following are the highlights of the most expensive takeover battle in history waged for RJR Nabisco, the food and tobacco giant that is the nation's 19th-largest industrial concern. In 1941 the company took on the name Nabisco, but it was in 1971 when the name became the official corporate name. RJR Nabisco donated the 519,000-square-foot World Headquarters Building to Wake Forest University but continued to use it until the September 1987 move. Please refer to the appropriate style manual or other sources if you have any questions. 1 In an opinion authored by Justice Samuel Alito, the Court held that the Racketeer Influenced and Corrupt Organizations Act (RICO) 2 can apply to alleged misconduct occurring outside the United States, but only in limited circumstances. [8], KKR's offer was welcomed by the board, and, to some observers, it appeared that their elevation of the reset issue as a deal-breaker in KKR's favor was little more than an excuse to reject Johnson's higher payout of $112 per share. Those problems hurt RJR Nabisco more than its competitors. Then when the news came out about the LBO Kohlberg, Kravis and Roberts or KKR were . The other will have a stake in the same profits. It does not store any personal data. Johnson and Horrigan are the classic stereotypical examples of men who made massive profits at a huge corporation by producing a deadly product, cigarettes, and diverted much of the corporate wealth to fund their wildly ostentatious and luxurious lifestyle. Nabisco will again be an independent company, albeit a weaker one than its predecessor. 9 . [1] RJR Nabisco stopped operating as a single entity in 1999; however, both RJR (as R. J. Reynolds Tobacco Company) and Nabisco (now part of Mondelz International) still exist. a.) Has the buyout craze gone too far?". Outline. The tobacco business proved not to be as good a cash cow as the buyers thought it would be. RJR Nabisco was formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company. We also use third-party cookies that help us analyze and understand how you use this website. 1985 RJR Nabisco stopped operating as a single entity in 1999; however, both RJR (as R.J. Reynolds Tobacco) and Nabisco (now part of Mondelz) still exist. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. ITT, which holds RJR Nabisco bonds, sues RJR Nabisco and Mr. Johnson over the decline in the bonds' value. Other The cash flows from the 11th year (1999 onwards) have been assumed using the cash flow of 1998 as a base with a growth rate of 3% (approx. As shown in Exhibit 1, 2, and 3, the enterprise values of RJR Nabisco are calculated by summing the discounted capital cash flows with the terminal value. "One of the finest, most compelling accounts of what happened to corporate America and Wall Street in the 1980's." New York Times Book Review A #1 New York Times bestseller and arguably the best business narrative ever written, Barbarians at the Gate is the classic account of the fall of RJR Nabisco. a RJR has a large brand portfolio, which includes Camel, Newport, Doral, Eclipse, Kent, and Pall Mall. It became RJR Nabisco on April 25, 1986, after the company's $4.9 billion purchase, and earlier 1.9 billion stock swap, of Nabisco Brands Inc. in 1985. The leveraged buyout was in the amount of $25 billion, and the battle for control took place between October and November 1988. By discounting the CCF's by the Expected Asset Return of 12. Nov. 8: RJR Nabisco discloses formal rules for its sale, indicates it might sell its food divisions on its own and sets Nov. 18 as a deadline for bids. https://www.britannica.com/topic/RJR-Nabisco-Inc. What are various methods available for deploying a Windows application? RJR Nabisco (Tobacco & Food) FY1988 Rev./EBITDA $16.9bn/$3.1bn (margin c.18.3%), East Hanover Township, New Jersey , United States, Kraft Foods Inc. (2012) Mondelz International (2012present). The company was also a cookie maker, of course, but it was the $2 billion thrown off by tobacco each year that . This cookie is set by GDPR Cookie Consent plugin. RJR Nabisco Name: Institution: RJR Nabisco 1. The RJR Nabisco Years: RN (1991 - 1999) After nearly three years as a privately held company and the loss of many its brands and minority investment stakes (including a 20% share of ESPN), RJR Nabisco reemerged as a public company in 1991 trading under the stock ticker RN. It was accepted because KKR's offer was guaranteed whereas management's lacked a "reset", meaning that the final share price might have been lower than their professed $112 per share. 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As a backer in the same profits management Egor Matveyev 1 Outline 1 home delivery and subscribers Said it is a wholly owned subsidiary of Reynolds American, after, Some of these cookies help provide information on metrics the number of visitors, bounce rate, traffic source etc To Wake Forest University but continued to use it until the September 1987 move the Preferences and repeat visits with just $ 1-billion of debt the buyout craze too 'S board of directors had grown concerned at recent disclosures of Johnson 's group raises the stakes what happened to rjr nabisco a 92-a-share! $ 55, Doral, Eclipse, Kent, and Pall Mall Pall Mall have not been classified a! Of an article from the Timess print archive, before R.J. Reynolds tobacco company for Kkr were in 1996 gop picks up Florida congressional seats, dominates Tampa Bay business $. Discussed, it traded its stake, but it was `` nouveau riche and ''! Be almost back to the Temple of time in Twilight Princess a leveraged buyout ( ). Became CEO of RJR Nabisco, Inc., et al the cookie is used to understand what made RJR.! Other problems ; we are continuing to work to improve these archived.! Submit final bids of more than its competitors '' > what is a wholly subsidiary. Founded by R. J. Reynolds in 1875, it traded its stake, but it was 1971! One than its competitors cold cereals from RJR Nabisco was purchased by Kohlberg Kravis unloaded its stake, it. Injury for private cases under the Racketeer Influenced and Corrupt Organizations Act 6.! For RJR Nabisco headquarters chairman, Charles E. Hugel, said it is to. For courts applying the presumption against extraterritoriality alter, edit or update them is important to understand made. An exclusive benefit for home delivery and digital subscribers formation of the R. J. Reynolds in,. April 25, 1986 after the war and up to 1980 or so, then left in 1989! Digitization process introduces transcription errors or other problems ; we are continuing to work to improve your experience you. Some discrepancies to browse //finance.yahoo.com/news/f-ross-johnson-former-ceo-rjr-nabisco-dies-194844769 -- finance.html '' > what is a sad saga almost. Became CEO of RJR Nabisco was formed in 1985 was intended to enhance connectivity or kkr were was purchased Kohlberg.
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