Tobacco Shares Higher After Legal News
NEW YORK (Reuters) - Shares of most U.S. tobacco companies gained ground on Monday amid a report that two companies may settle punitive-damage claims against them, while the European Commission said it was suing two others over alleged involvement in ciga
Loews Corp. and Vector Group Ltd. shares were mixed following reports that tobacco companies Lorillard and Liggett have tentatively agreed to pay $8 billion to settle punitive-damage claims against them in suits pending in federal court. Lorillard is a unit of New York-based Loews, and Liggett is part of Miami-based Vector.
According to an industry source, no final deal had been reached as of Monday morning.
Spokesmen for Lorillard and Vector did not immediately return calls seeking comment.
Loews' shares traded up $1-11/16, or 2 percent, at $87-3/8 after trading as low as $85-3/4 earlier in the day. Shares of Vector Group were off 1/16 at $13-1/4 after trading as high as $13-1/2 earlier in the day.
Meanwhile, shares of Philip Morris Cos Inc. and R.J. Reynolds Tobacco Holdings Inc. both climbed $1-1/16, or 3 percent, to $36-1/16. Both companies' shares had slipped in early morning trading after the European Union said it was suing the tobacco giants for alleged involvement in smuggling cigarettes into the bloc.
Philip Morris is a Dow 30 component. The Dow Jones industrial average was also higher on Monday.
A punitive-damage settlement for Lorillard and Liggett could insulate the companies from having to pay punitive-damage awards pending against them in other courts, according to newspaper reports and tobacco industry analysts.
The punitive-damage claims are part of nearly a dozen lawsuits pending before U.S. District Judge Jack Weinstein in Brooklyn, New York.
Lorillard and Liggett have been negotiating with plaintiffs' lawyers for about a month, the New York Times said on Saturday, quoting people close to the talks.
Separately, the European Commission said on Monday it had filed a civil lawsuit in a U.S. court against tobacco giants Philip Morris and R.J. Reynolds Tobacco over their alleged involvement in smuggling cigarettes into the European Union.
Both companies said they have not seen the lawsuit, and therefore could not comment.
Moody's Investors Service said on Monday that litigation and possible further regulatory supervision will remain high risk factors to credit quality in the U.S. tobacco industry over the medium term.
Moody's said none of the current legal actions against the U.S. tobacco industry carries a significant risk of bankruptcy over the short term and its outlook for the industry remains stable.
Moody's rates nine tobacco companies that operate in the United States, including Philip Morris, R.J. Reynolds, Loews and British American Tobacco Plc.