<BREAKFAST WITH THE FOOL>
Monday, November 16, 1998
"I can honestly say that I have never gone into any business purely to make money. If that is the sole motive, then I believe you are better off not doing it." -- Richard Branson
Snuffing Out Tobacco Suits
The tobacco industry has moved one step closer to snuffing out health-related lawsuits. Over the weekend, negotiators for the four major U.S. cigarette makers reached an agreement with attorneys general from eight states -- including New York and California -- that would involve paying up to $206 billion to 46 states over the next 25 years. After 25 years, the companies have agreed to pay $9 billion a year forever. The plan, expected to be formally announced today, requires approval from enough states to cover 80% of the U.S. Medicaid population. Friday will be the deadline for states to sign off on the deal.
Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %>, RJR Nabisco Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RN)") else Response.Write("(NYSE: RN)") end if %>, British American Tobacco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTI)") else Response.Write("(NYSE: BTI)") end if %> and Loews Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LTR)") else Response.Write("(NYSE: LTR)") end if %> Lorillard Inc. subsidiary already reached settlements with four states -- Texas, Florida, Minnesota, and Mississippi -- totaling $40 billion. On top of the proposed $206 billion payout, the companies have agreed to shell out $1.45 billion in the next five years for anti-smoking programs and an additional $250 million in the next 10 years to set up a national foundation dedicated to curbing youth smoking.
The plan not only would nip in the bud the biggest legal threat facing the tobacco industry, it is also less severe than the original $368.5 billion pact proposed last summer, which died in Congress. Under the latest plan, the cigarette makers won't be forced under regulation by the Food and Drug Administration (FDA) and won't have to print additional warnings on packs of smokes. Separately, the eight states also reached an agreement with smokeless-tobacco maker UST Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UST)") else Response.Write("(NYSE: UST)") end if %> under which the company would pay up to $200 million.
News to Go
Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> is booking $1 billion a month in Internet orders just months after starting the program, The Wall Street Journal reported. The company said at a semi-annual meeting with analysts Friday that almost half of its total revenues now come from the Internet, though the bookings are from existing customers, not new ones.
Construction aggregates manufacturer Vulcan Materials Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VMC)") else Response.Write("(NYSE: VMC)") end if %> announced it will acquire rival CalMat Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CZM)") else Response.Write("(NYSE: CZM)") end if %> for $31 a share in cash -- a 14% premium over CalMat's closing price Friday of $27 3/16. Including assumed debt of $130 million, the deal is valued at a total of $890 million. The transaction is expected to be neutral to Vulcan's 1999 per-share earnings and accretive to its 2000 EPS.
Negotiators from FDX Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> Federal Express unit and its pilots' union representatives will meet in Washington today with officials of the National Mediation Board, which oversees airline labor relations, in an effort to avoid a potential holiday strike. In the meantime, the express delivery company is working to reconfigure delivery routes, shifting packages to a growing network of trucks, in the event that the pilots do go on strike.
The Wall Street Journal reported that beverage and entertainment giant Seagram Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %> CEO Edgar Bronfman is expected to get rid of Frank Biondi, chairman and CEO of the company's Universal Studios Inc. subsidiary, in a move to gain direct authority over Seagram's growing entertainment operations.
Internet addresses registrar Network Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSOL)") else Response.Write("(Nasdaq: NSOL)") end if %> announced the resignation of its CEO Gabriel Battista, who said he is leaving the company for a combination "of new challenges and a once in a lifetime opportunity." The company's chairman, Michael Daniels, will become acting CEO, while CFO Robert Korzeniewski will take on the duties of acting chief operating officer (COO).
High-end jewelry and gifts retailer Tiffany & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIF)") else Response.Write("(NYSE: TIF)") end if %> reported fiscal third quarter earnings of $0.34, up from $0.32 last year and right in line with analysts' First Call mean estimate.
Electricity company PacifiCorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PPW)") else Response.Write("(NYSE: PPW)") end if %> is reportedly in talks to be acquired by ScottishPower PLC -- which provides electricity, gas, water, and telecommunications services -- for 4 billion pounds ($6.6 billion, or about $22 a share), according to two British newspapers. That would represent a 15.8% premium over PacifiCorp's closing price Friday of $19.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
</BREAKFAST WITH THE FOOL>