American Brands Will Sell Off Life Insurance Unit for Cash

American Brands Inc., acting on its plan to concentrate on its core businesses, said Wednesday it will sell its Franklin Life Insurance unit to American General Corp. for $1.17 billion in cash.

American General, a Houston-based, diversified financial services holding company, has also been pursuing a $2.6-billion hostile takeover of another competitor, Unitrin Inc.

Franklin Life, based in Springfield, Ill., focuses on the middle-income insurance market. It has more than $6 billion in assets, and some industry analysts have speculated that American General may want to use some of Franklin’s excess capital to pay for the proposed Unitrin deal.

American Brands, owner of the American Tobacco Company, also makes Jim Beam whiskey, Master locks and other household and office products. It has agreed to sell its tobacco business to Britain’s B.A.T. Industries for $1 billion.

The Franklin deal, which is subject to antitrust and insurance regulatory approvals and other customary conditions, is expected to be closed during the first quarter of 1995 and will be tax-free, it said.

American Brands said that its board authorized the purchase in the open market and in privately negotiated transactions of up to 10 million shares of its common stock following the closing of the deal.

American Brands gained 87.5 cents to $35.25 on the New York Stock Exchange and American General added 25 cents to $26.25. American Brands said that even though Franklin had been a strong income producer, the transaction will not affect American Brands’ ability to pay dividends.