Takeover Talk Boosts Stocks of Liggett, American Brands
Shares of cigarette makers American Brands Inc. and Liggett Group Inc. were fired up by takeover speculation Friday after Liggett’s biggest stockholder, Bennett LeBow, said he was interested in buying the larger American Brands.
Traders were acquiring the shares of both companies amid wide-ranging speculation over what LeBow, a financial wizard who helped rescue Western Union from bankruptcy, might do next. American Brands stock surged $3.23 a share to $51.675. Liggett jumped $3 to $12.375.
LeBow has said that he is interested in buying American Brands or its tobacco operations. But analysts said the wily Lebow may have something different in mind. “The feeling is that LeBow is trying to force them to buy Liggett,” an arbitrager said.
The chance that Liggett will acquire American Brands seemed less than assured, analysts said, since American Brands carries an estimated price tag of $7 billion.
“We feel very strongly that the Liggett people are trying to put themselves in play to be taken out of business by anyone,” said analyst Roy Burry of Kidder Peabody & Co. “There is no other way it could happen.”
It marks the second time in less than a year that Wall Street cannot decide whether American Brands is the predator or the prey. Previously, American Brands turned on another potential suitor, E-II Holdings Inc., buying out that Chicago-based company after it bought a piece of American Brands.
Filing Stirred Speculation
But there was also speculation American Brands would restructure or be taken over by another party.
The takeover speculation was stirred by an announcement late Thursday that Brooke Partners LP, controlled by LeBow, had filed for government clearance to buy more than $15 million of American Brands voting stock and may buy more than 50% of its voting securities.
LeBow had approached American Brands in July about the possible acquisition of its tobacco operations by Liggett, American Brands reported. Citing record earnings in the first half of 1988, however, American Brands said it has no interest in meeting LeBow to discuss an acquisition.
Last year, LeBow obtained a controlling interest in a new firm that merged Western Union Telegraph Co. with ITT Corp.’s international telegraph business. He also was involved in a bid for Allegheny International Corp.
His Liggett Group, once part of Grand Metropolitan PLC, made headlines in June by becoming the first cigarette maker to lose a tobacco product liability case, in a jury decision that is being appealed. Its brands include L&M; and Chesterfield.
Old Greenwich, Conn.-based American Brands makes such cigarette brands as Pall Mall, Lucky Strike and Carlton. It also owns the Jim Beam Brands Co., which makes Kentucky straight bourbon whiskies. It is also in the financial services business.
Might Make a Deal
Lebow, a New Jersey investor, is best known as a turnaround expert. In addition to acquiring Liggett in 1986 and recapitalizing Western Union, he also bought MAI Basic Four, a computer company, for $105 million in 1985.
Some traders speculated that American Brands might want to work out a deal with Lebow that would let it bail out of the tobacco industry because of the potential liability in claims by smokers who blame tobacco companies for health problems.
