ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, October 9, 1996 TAG: 9610090049
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
American Brands Inc., once one of America's largest cigarette makers, said Tuesday it wants to kick the habit for good and concentrate on selling staplers, bourbon and golf balls.
The company will spin off its British-based Gallaher tobacco business and change its own name to Fortune Brands. It would be the first major tobacco company to completely cut ties to the tobacco business.
American Brands' shares rose nearly 8 percent on the news, jumping $3.62 1/2 a share to $48.12 1/2 on the New York Stock Exchange.
While the plan drew a favorable response on Wall Street, it also aroused criticism from anti-smoking advocates, who accused the company of trying to avoid the legal and moral crusade against tobacco businesses.
``They can run but they can't hide,'' said John Banzhaf of the New York-based Action on Smoking & Health, a nonprofit group that has been instrumental in promoting anti-smoking legislation.
But Robert Rukeyser, American Brands' vice president for corporate affairs, said ``litigation was not a prime motivator'' in the company's decision.
Tobacco companies are under intense pressure from federal regulators over advertising and other marketing practices that may reach children. They also face a rising tide of lawsuits.
A growing number of states have gone to court to seek reimbursement from tobacco companies for what they must spend through Medicaid programs for health care for smokers. Tobacco companies also are fighting suits that accuse them of concealing what they knew about the extent of health risks.
RJR Nabisco Holdings Corp. has been under pressure to separate its food and tobacco businesses from shareholders, who say the company is undervalued as a result. RJR has said it likes the idea, but said the timing isn't right in part because of the likelihood that such a move would be challenged in court over the tobacco liability issue.
American Brands, which sold its U.S.-based American Tobacco Co. for $1 billion in 1994, said the spinoff of its remaining tobacco interests will allow it to focus on consumer brands that include Jim Beam bourbon, Titleist golf equipment, Master Locks, Swingline office products and Moen faucets.
But Banzhaf and other representatives of anti-smoking groups said American Brands' plan is an attempt to avoid legal liability.
Dick Daynard of the Boston-based Tobacco Products Liability Project and law professor at Northeastern University, also noted that an attorney announced plans last week to sue Gallaher on behalf of 40 British lung cancer victims.
Gallaher, which sells Benson & Hedges in Europe and Silk Cut cigarettes, has 40 percent of the market in Britain.
Rukeyser did point out that two years ago, when American Brands shed American Tobacco - makers of Lucky Strikes and Pall Malls - to Brown & Williamson, the new company also assumed liability through the purchase.
However, Rukeyser also noted that the litigation process is much different in Britain, where personal injury suits are heard by judges and do not include punitive awards.
American Brands, based in Greenwich, Conn., said the transaction will be tax-free to U.S. shareholders and depends on getting favorable tax rulings. The company hopes to complete the spinoff in 10 months.
Jack Maxwell, an industry analyst with Wheat First Butcher Singer, said the move makes good sense because American Brands stock was undervalued and ``the parts are worth more than the whole.''
LENGTH: Medium: 65 linesby CNB