B.A.T shares bask as tobacco bill dies
By Louise Ireland
LONDON, June 18 (Reuters) - Shares in B.A.T Industries Plc reflected the market's relief
on Thursday over the death of the the landmark McCain tobacco bill in the U.S. Senate
overnight.
B.A.T stock rose 2.3 percent or 13p to 584p after tobacco stocks powered ahead in the U.S.
in reaction to the news, with Philip Morris gaining nearly
five percent.
"This has got to be good news for B.A.T. The tobacco industry warned that the bill
had threatened bankruptcy and this leaves room for a slimmed-down bill," said CSFB
analyst Nyren Scott-Malden.
The bill had threatened the U.S. tobacco industry with a settlement estimated at $500-$850
billion. U.S. tobacco companies said earlier this year that they could no longer support
the legislation which would have raised cigarette prices by $1.10 per pack over five
years.
B.A.T's Brown & Williamson subsidiary is the third-largest tobacco company in the U.S.
after Philip Morris and RJR Nabisco Holdings .
B.A.T called the bill's failure good news for the U.S. tobacco industry and said it might
bring "more sanity" into the smoking debate.
But a spokesman said it was too early to say what effect the bill's failure would have and
that it was "indicative of a chaotic performance in the Senate."
"Our reading is that the bill is effectively dead," the B.A.T spokesman told
Reuters.
This was good news for the industry, he said, but added that "little
constructive" had emerged from the U.S. government process.
The bill's sponsor John McCain, an Arizona Republican, said he was pessimistic about
resurrecting tobacco legislation this year, although some Senate conservatives who opposed
him spoke of trying to put together a narrower bill.
The vote was the second in a complicated two-part procedural move to get the bill off the
floor, allowing the Senate to go on to other business after a month-long stalemate.
McCain's bill went far beyond what the industry agreed with the Clinton administration in
June last year, in what was planned as a historic deal to settle states' tobacco-related
health claims in return for future immunity.
The U.S. tobacco industry now faces a raft of piecemeal litigation from a horde of
claimants.
"They've avoided a ruinous bill but they have not put a lid on litigation and they
now face the uncertainty of piecemeal cases from claimants," said ABN AMRO Hoare
Govett analyst David Ireland.
"The U.S. tobacco majors would certainly want to remove the climate of uncertainty
hanging over their shares," said Ireland.
But analysts agreed the industry was better off now the bill had failed.
"Not all states will win, not all will sue and some have already had their case
thrown out," said a third analyst.
U.S. tobacco profits are about a third of B.A.T's total tobacco profits and tobacco
overall represents 60 percent of B.A.T's total profits.
06:16 06-18-98 |