BAT still keen on tobacco takeover

BAT INDUSTRIES, the cigarettes to financial services conglomerate, said it was still keen on its dollars 1bn takeover of American Tobacco, despite confirming that there was a clause allowing the group to abandon the deal if US regulators pursued their attacks on smoking, writes John Willcock.

BAT claims that the deal announced in April will create a strong third force in the US tobacco market behind the present leaders Phillip Morris and Reynolds. The company hopes the Federal Trade Commission will take a more favourable view of the takeover on competitive grounds than the Food and Drug Administration has on health issues.

BAT's chief executive, Martin Broughton, has said the company could invoke a 'material adverse change clause' in the contract with American Tobacco if US anti-smoking legislation becomes too severe for BAT's liking.

Despite this, the company maintains that it is still keen on the deal. If the FTC clears the takeover, the deal should be completed by the end of the year.

FDA commissioner David Kessler accused BAT of genetically engineering a new strain of tobacco, Y-1, with a high nicotine content. The group said yesterday that the tobacco strain had been developed specifically at the request of the US Department of Agriculture, as part of a drive to find tobacco with lower tar content.