Blue Cross to oppose BAT merger

US HEALTHCARE insurance group Blue Cross and Blue Shield, one of the groups fighting through the courts for compensation for smokers, has written to BAT Industries warning that it will oppose the pounds 35bn merger of the group's financial services operations with Zurich Insurance of Switzerland.

Blue Cross, which is pursuing BAT Industries' US cigarette producer, Brown & Williamson, for damages, told BAT's solicitors Herbert Smith it is sending representatives to oppose the deal when it comes up for approval in the High Court next Wednesday.

The sanction of the Court is needed before BAT can go ahead with plans to split off its financial services arm and merge it with the Swiss insurer.

Blue Cross and Blue Shield, one of the leading US healthcare groups, fears the deal will complicate its attempts to secure compensation for policyholders suffering from smoking-related diseases. Fears of a large hit from the projected US legal wrangle over tobacco liabilities has been a significant drag on BAT's shares.

BAT said yesterday it had been advised that the chances of the efforts to derail the deal succeeding were slim. BAT's solicitors have told the company that under English law the deal could only be stopped by a creditor and as Blue Cross has yet to win any litigation against Brown & Williamson it is not technically a creditor at present.

BAT Industries is injecting its financial services operations, which include Eagle Star and Allied Dunbar in the UK and Farmers in the US, into Zurich Financial Services, which will be 57 per cent owned by BAT shareholders.

BAT and Zurich yesterday said that dealings in BAT Industries and Zurich Insurance would be suspended on the close of trade next Thursday. Shares in Allied Zurich, the UK-quoted vehicle for the financial services group, and British American Tobacco, BAT's tobacco arm, would start in London the following Tuesday.