While the US tobacco received a boost on Friday when an Indiana jury rejected claims by an attorney's widow that the companies which sold her late husband cigarettes were negligent, it was the first bright spot in a black fortnight.
US analysts said the Indiana verdict was important because it suggested that a Florida jury's award, earlier this month, of damages for only the second time in history to a smoker who contracted cancer may have been an exception in a long run of industry victories in the courts.
In the UK, however, many still expect a difficult market for Imperial shares, marring its return to the stock market in October, after a 10- year absence. Paul Beaufrere, an analyst at HSBC James Capel, said US investors were unlikely to hold their new Imperial shares, "given the environment in the US".
Along with other market watchers, he predicts a significant "flow-back" of shares from the US to London.
Hanson itself will not raise any money directly from the demerger, details of which had been expected on Friday. But a technical hitch involving the US Securities and Exchange Commission and the New York Stock Exchange meant the announcement of listing details had to be postponed until Wednesday.
About a third of Hanson's shares are held by US investors, who are still reeling from the latest blows against the tobacco industry in that country. In the demerger, shares in Imperial will be offered on a matching basis to existing shareholders. The probable split is one share in Imperial for every 10 Hanson shares held. An Imperial spokesman said: "It is not necessarily the case that US investors will sell their Imperial shares, as we have no exposure to the US market at all."
Despite the Indiana ruling, however, last week saw the once seemingly invincible US tobacco industry on the ropes. On Friday, President Clinton implemented his promise of tougher action against smoking with a clampdown aimed initially at teenage smoking. Cigarettes are to be brought under the wing of the all-powerful Food and Drugs Administration. Initially, the FDA will restrict the use of vending machines and curb advertising aimed at teenagers.
The first bombshell came earleir this month when a Florida jury awarded Grady Carter and his wife $750,000 (pounds 480,000) in damages for negligence, after he had contracted lung cancer. It was only the second time a US jury has awarded damages in a smoking suit. The first award, in 1988, was overturned on appeal.
Brown & Williamson, the defendant, will appeal. But shares in BAT, its parent, lost more than pounds 1bn - 10 per cent of their value - after the verdict. Since then, bad news has come thick and fast. On Thursday, the state of Oklahoma launched a $1bn suit against tobacco companies, public relations outfit Hill & Knowlton, and several US law firms that have represented the tobacco industry. It became the 14th state to sue the tobacco industry in a bid to recoup the costs of treating smoking-related illnesses.
The significance of the Carter case is that the jury was handed evidence of deliberate concealment by the company. It showed Brown & Williamson writing about the addictive qualities of nicotine in internal documents from the 1960s, while publicly denying any such addiction. Such documents were not available to the plaintiffs in the Indiana case.
The implications in the UK, for Imperial, and Gallaher, its main rival, owned by US company American Brands, cannot be discounted.
Cameron Fyfe, a Scottish solicitor who is handling the only current cigarette claim in the UK, said the Carter case could have great relevance for claims in this country.Reuse content