Cigarette Maker Liggett Sold for $137 Million Cash
A New York investor Tuesday paid $137 million cash for the ailing Liggett Group, the smallest of the six major U.S. cigarette companies and maker of Chesterfield, L&M; and Eve brands.
Investor Bennett S. Le Bow, 49, who has interests in such far-flung businesses as costume jewelry, ice cream and computers, purchased the Durham, N.C.-based company from Grand Metropolitan PLC, a British conglomerate with interests in hotels and brewing. Grand Met had owned Liggett Group, the parent of Liggett & Myers Tobacco, since 1980.
Liggett has seen its share of the domestic cigarette market slide from 5.7% in 1984 to 3.9% in 1986, as its brands have been battered by competition from larger rivals R. J. Reynolds and Philip Morris. Its operating profit dropped to $6.4 million last year from $66.7 million in 1984 because of intense price-cutting by makers of generic cigarettes, a market that Liggett once had to itself. Liggett reported $685 million in sales last year.
Le Bow, who wasn’t available for comment Tuesday, has been credited for engineering a modest turnaround at MAI Basic Four, a Tustin computer maker that was languishing when he purchased it for $105 million in January, 1985. Le Bow turned the company profitable within eight months, in part by firing most of the company’s top executives, selling its Canadian division and strengthening the marketing efforts for its business computers.
Alan Hilburg, a spokesman for Le Bow at a public relations firm in Dallas, said Le Bow has not disclosed his plans for Liggett & Myers. Hilburg said Le Bow purchased Liggett because “it fits his criteria . . . a team philosophy, a strong management, strong marketing and manufacturing skills.”
Hilburg said Robert E. Gillis, a longtime investment partner of Le Bow who is acquiring a minority interest in Liggett, would become the cigarette maker’s chairman.
Besides MAI Basic Four, Le Bow, through his company, Le Bow Industries, owns Sarah Coventry, a New York costume jewelry distributor; Saxon Business Products, a Florida distributor of Saxon and Panasonic copying machines; and Brighams, a Boston ice-cream manufacturer.
John C. Maxwell, an analyst with the Furman Selz Mager Dietz & Birney investment firm in New York, said Liggett was a leader in generic cigarettes but lost ground in the last year to cigarette maker Brown & Williamson, which brought out its own line of generics. Maxwell said sales of generics, which now account for about 4% of all cigarette sales, have flattened in recent years.
Maxwell said that Liggett’s old-time brands, such as Chesterfield and L&M;, have been losing share and that its Eve brand has continued to gain in sales, although Eve sales account for less than 1% of the total market.
Grand Met has been looking for a buyer for Liggett cigarette businesses almost since it bought Liggett’s tobacco, liquor and consumer products businesses in 1980 for $450 million. The non-tobacco units are still part of its U.S. division, Grand Met USA.
An agreement to sell Liggett for $325 million in 1984 to a group including management collapsed as profits fell. Last year, Grand Met sold Pinkerton Tobacco Co., which makes smokeless and pipe tobacco, for $137.8 million to a Swedish concern and announced in September it was negotiating to sell Liggett.
“Grand Met determined some years ago that it didn’t fit into its plans,” said Roger Hooker, senior vice president and general counsel of Grand Met USA in Montvale, N.J. “It is the smallest of the six domestic (cigarette) producers, and Grand Met has been moving more toward a consumer services oriented company.”
