Legal case hits Imperial shares

Analysts expect shares in Imperial Tobacco and Millennium Chemicals, two of the demerged businesses of the Hanson conglomerate, to start trading at the bottom end of original forecasts when dealings begin today and tomorrow. Sentiment has been hit by a resurgent legal campaign waged by lung cancer sufferers and an increasingly difficult outlook for the chemical industry around the world.

One estimate yesterday suggested Imperial would today open in the range 365p to 375p, some way below last week's "grey market" price. Millennium, meanwhile, is trading at around $26 a share on a "when issued", or grey- market basis, in New York, compared with hopes that the shares could be priced at up to $35. Full trading in the US-listed stock is expected to begin tomorrow.

The biggest impact has been last Friday's news that 40 former smokers in the UK who suffer from cancer were preparing to launch a class action against Imperial. The move is a landmark in that it is the first to be pursued on a "no win, no fee" basis. US investors, who hold around 30 per cent of Hanson's shares, are thought likely to be nervous about the legal moves.

But Gareth Davis, Imperial's chief executive, yesterday dismissed the case as a continuation of one of several which had been mounted against the company since 1992. "We have great confidence in the strength of our defence. We will defend the claims with great vigour," he said. The situation had not changed, as far as Imperial was concerned, he said.

One analyst claimed, however, that the move "will affect the receptiveness of the market to Imperial". He suggested the issue, which has dogged tobacco companies operating in the US since the 1950s, could become a bigger factor for Imperial in the future.

Meanwhile, investors are not expected to be particularly welcoming towards Millennium, which has seen prices peak in the market for its chemicals, used in the plastics industry. Heavy selling by UK institutions which do not want to be exposed to the US stock market is also likely to affect the price.

One observer said: "I don't think North American commodity chemicals are massively in vogue at the moment. The technical position is also adverse at the moment and will remain adverse for some time." He cited the selling which took place after US Industries, a heavily-indebted grouping of American businesses was floated off last year.

Investment column, page 19