BAT shares up as settlement nears

Prospects that tobacco companies would be released from future litigation uncertainties drove up share prices in BAT and US tobacco stocks yesterday in anticipation that the industry was poised to reach an historic settlement.

The lead attorney in settlement talks, Mike Moore, said last night they were progressing well. "We have made tremendous progress," he said. "We got more concessions from the industry today. We are very optimistic that we can resolve this matter very, very soon."

Shares in BAT, which owns US tobacco group Brown & Williamson, rose 21.5p at one point, closing 14p higher at 582p. Philip Morris, the world's largest cigarette company, was the most actively traded stock on the New York Exchange, its shares jumping over 4 per cent, while shares in the number two group, RJR Nabisco, rose 2.5 per cent.

A spokesman for BAT said pressure was growing on the industry to reach a settlement ahead of the first Medicaid lawsuit on 7 July. Until now, all the litigation cases have been private lawsuits or class actions. The Mississippi Medicaid case, thought to be for several million dollars, is being brought by Mr Moore. "I don't see how he can drop his suit unless an outline agreement can be reached," said BAT. "Both sides have an interest in getting this resolved quickly."

Diana Temple, an analyst in Salomon Brothers' New York office, said: "It is highly likely we'll get a settlement soon."

While BAT was keeping quiet about what a settlement might mean, analysts said the end to uncertainty would be positive despite substantial costs to the industry, estimated at around $300bn.

One significant new demand, leaked yesterday, was a requirement for the tobacco companies to pay $50bn as a "restitution" sum for misleading consumers about the dangers of smoking. The proposal is a response to the tobacco companies' demands to be shielded from punitive damages won in smokers' lawsuits - one of the biggest obstacles in seven months of settlement talks according to insiders.

Although a $50bn payment would wipe out the tobacco industry's annual sales, analysts said the low price of cigarettes in the US meant there was plenty of scope to claw back some of the cost in higher prices.

Jonathan Fell from UK brokers Merrill Lynch said: "Cigarettes are massively cheap in the US and the tax burden is really low. In the US a packet of Marlborough costs about pounds 1.20 compared to pounds 3.12 here. These companies will try to pass on the costs to consumers. They play it down because it would upset the health lobbyists."

Analysts said the $50bn plan would also be attractive, because tobacco companies could offset the cost against tax, whereas punitive damages were not tax-deductible. Mr Fell said tobacco companies' profits would be hit but share prices would rise.

Brown & Williamson last year made $780m from US domestic operating profits on $4.2bn of US tobacco sales.

"They are not going to make the profits they did," Mr Fell said. "But settlement would put BAT's US business on a more stable footing. The threat of massive lawsuits means tobacco is in for free in BAT's share rating at the moment."

Any settlement would restrict tobacco companies' ability to advertise and could require the groups to pay billions up front and $8bn to $15bn a year in perpetuity.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Women protest at the rape and murder of Jyoti Singh
tvReview: It's a tough watch, but the details of the brutal gang rape and murder of medical student need to be shared if we want to strive for global gender equality
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
health
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
News
people
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
people
ebooks
ebooksA special investigation by Andy McSmith
News
i100
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
tv
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
News
i100
Arts and Entertainment
Jeffrey Archer holds up a copy of 'Kane and Abel', a book he says was ripped-off by Bollywood
books
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot