Philip Morris
RJR Nabisco Holdings Corp.
Fields
- Area
- WOODWARD,ELLIS/OFFICE
- Attachment
- 2047002132/2047002168
- Type
- REPT, REPORT, OTHER
- BUDG, BUDGET, BUDGET REVIEW
- CHAR, CHART, GRAPH, TABLE, MAPS
- PHOT, PHOTOGRAPH
- BUDG, BUDGET, BUDGET REVIEW
- Site
- N622
- Named Person
- Black, G.
- Broin
- Burns, A.
- Castano
- Chakalian, R.
- Engle
- Frome, R.
- Fulford, R.
- Granier
- Hanson, D.
- Lacey
- Lampen, R.
- Lebow, B.
- Ridings, B.
- Stanley, M.
- Starbuck, W.
- Strauss, P.
- Uydess, I.
- Wigand, J.
- Zuckerman, F.
- Broin
- Request
- Stmn/R1-016
- Recipient (Organization)
- Board of Directors
- Document File
- 2047002122/2047002199/Lebow - Liggett
- Litigation
- Stmn/Produced
- Author (Organization)
- Brooke Group
- Named Organization
- Amer, American Tobacco
- Bat, British American Tobacco
- Board of Directors
- Brooke Group
- Bw, Brown & Williamson
- Calpers
- Chrysler
- Ebita
- Everready Batteries
- FDA, Food and Drug Administration
- Gallaher
- Hanson Plc
- Ibm
- Imperial Tobacco
- It
- Itt
- Lm, Liggett & Myers
- Loews
- London Brick
- Lor, Lorillard
- Management Board
- Nabisco
- New Valley
- Nyu
- Olshan Grundman
- RJR Intl
- RJR Nabisco
- RJR, R.J.Reynolds
- Rjrn
- Shareholder Board
- Texaco
- Tobacco
- United Gas Industries
- Ust
- Alex Brown
- Bat, British American Tobacco
- Master ID
- 2047002132/2168
Related Documents: - Date Loaded
- 05 Jun 1998
- UCSF Legacy ID
- zxn65e00
Document Images
2047002143
LITIGATION SETTLEMENT
Proposed settlement of Castano (nicotine addiction) class action
- Settles most important tobacco claim (also covers distributors)
5% of domestic tobacco's pretax income each year (up to maximum $50
million)
Payment terminated if remaining defendants prevail in litigation
If certification overturned, settlement applies if Castano-type class certified
elsewhere
Assured of settlement terms substantially more favorable than any other
defendant (payments could be reduced to zero)
2047002144
LITIGATION SETTLEMENT
Settlement of five State Attorney General suits (FL, LA, MA, MS, WV)
- Assuming a tobacco company merger, initial payment of $125 million
Annual percentage of 2.5% to 7.5% of domestic tobacco pretax income,
depending on whether additional states join the settlement
Settles claims of the most aggressive states with high Medicaid populations
Provides mechanism for other states which sue (if any) to join settlement
Payment terminated if remaining defendants succeed on merits
Most Favored Nation Clause: Benchmark figure of three times Brooke
Group's payments per point of market share
2047002145
LITIGATION SETTLEMENT
Settlement is applicable to:
RJR (First Option)
Lorillard
BAT
American Brands
UST
2047002146
LITIGATION SETTLEMENT
No commitment to cooperate except as required by law
- Not waiving attorney/client or any other legal privileges
- Continue to vigorously defend all other litigation
Model of new agreement based on responsible co-existence
- Cannot legislate away the industry
- Cannot continue to ignore public health authorities
The settlement is a no-lose situation
- Wins if the industry wins
- Limits liability if industry loses
2047002147
LITIGATION SETTLEMENT
Catastrophe Insurance
Some cases being tried by a judge only, no jury
No need to bond potential judgments at lower court level
RI;MF1,MI3ER TEXACO!!
Can RJR afford a multi-billion dollar bond?
2047002148
C
LITIGATION SETTLEMENT
Estimated Cost of Catastrophe Insurance
($ in millions)
~
RJR Domestic Tobacco 1995 EBITA $1,420
Less Pro-Rata Interest Expense (390)
Less Pro-Rata Corporate Overhead (42)
Pre-Tax - Domestic Tobacco $ 988
Castano Payments 49
Medicaid Payments (assumes all states) 74
Less Estimated Legal Fee Reduction (40)
Total $ 83
SE'.ttlelllellt Cost I"ei L'ack 1.4 Cents / Pack
204'7002149
LITIGATION ISSUES
Estimated cost of catastrophe insurance, if applied to:
Lori l 1 ard
Settlel»ent Cost Per I'ack
Brown & Williamson (BAT)
Settlement Cost Per Ptack
2.8 Cents / I'lack
l.(i Cents / Pack
201'7002150
SPINOFF VALUE WI'1,H O Urh SETTLEMENT
RJRN Stock Could Be Worth More Than $47 Per Share
Nabisco could be worth $38 or more post spinoff
$25 per RJRN share
Tobacco could be worth $22 or more post spinoff 1)
9% yield with $2 dividend
Without benefit of Liggett Group's settlement
(1) Morgan Stanley estimated up to a $17 dollar per share value for a stand-alone tobacco company
2047002151
SPINOFF VALUE WIr1'H SETTLEMENT
RJRN Stock Could Be Worth More Than $58 Per Share
Nabisco could be worth $38 or more post spinoff
$25 per RJRN share
Tobacco could be worth $33 or more post spinoff, with the litigation
settlement
6% yield with $2 dividend
2047002152
DIVIDENDS
Significant Dividend Increase
Adopt a new dividend policy
- At least 6(1 °Io of the Tobacco Company's Net Cash Flow
Net Cash Flow = Net Income plus After-Tax Amortization
plus Depreciation less Capital Expenditures
An annual dividend of $2 for the Tobacco Company, commencing in the second
half of 1996 based on UB/E/S estimates of RJRN's earnings in 1996 and 1997
