Tobacco.org

Fitch Comments On Swedish Match Lawsuit Against UST 

Fitch Ratings is not changing its 'A' rating or Stable Rating Outlook on UST, Inc. following the lawsuit filed by Swedish Match North America, Inc. (SMNA), a subsidiary of Swedish Match AB, against U.S. Smokeless Tobacco Company, a subsidiary of UST Inc. The suit was filed in Federal District Court in the Western District of Kentucky on July 22, 2002.

SMNA's complaint seeks a permanent injunction and alleges substantial damages resulting from UST's alleged business conduct in violation of federal antitrust law. The statute of limitations for antitrust claims is for the four years prior to the filing of the lawsuit, or mid-1998. Since 2000, UST has been operating under a court order as a result of the Conwood verdict that limits the company's retail marketing practices and should limit the extent of any liability. To comply with the court order, UST has modified its business practices to require all display rack changes to be made in writing to UST by the retailers. Similar to SMNA's lawsuit, the Conwood case was based on an antitrust claim. UST has stated that it intends to appeal the Conwood case to the United States Supreme Court, but Fitch's ratings do not depend upon a favorable outcome.

Jump to full article »

Suit accuses tobacco firm of unfair competition 

A lawsuit that could benefit thousands of Wisconsin users of smokeless tobacco has been filed against a company that has already been ordered to pay more than $1 billion in a related case.

The suit alleges that UST Inc., maker of Copenhagen, Skoal and other leading brands of smokeless tobacco, has engaged in antitrust activities against its major competitor. Those activities, in turn, have led to higher prices and fewer choices for smokeless tobacco users, Milwaukee attorney Brian Smigelski said Monday.

Smigelski's firm, Friebert, Finerty & St. John, filed the suit last week on behalf of Milwaukee resident Jason Feuerabend and is asking Milwaukee County Circuit Judge Dominic Amato to certify it as a class action. Such an order could allow anyone in Wisconsin who bought so-called moist smokeless tobacco since 1990 to join the suit.

Jump to full article »

UST's Conwood review denied, Swedish Match sues 

A request by UST Inc. (NYSE:UST) for a hearing by a full panel of judges on a $1.05 billion judgment won by rival Conwood was denied, the U.S. Sixth Circuit Court of Appeals in Cincinnati said on Monday.

Earlier in the day, smokeless tobacco maker Swedish Match (Stockholm:SWMA.ST) said it filed an antitrust suit against rival U.S. Smokeless Tobacco Co., a unit of UST Inc., alleging illegal and exclusionary marketing practices. . .

Greenwich, Connecticut-based UST now has 90 days to appeal to the U.S. Supreme Court, Merrill Lynch tobacco analyst Martin Feldman said. Feldman said the company's chances of success are small since the Supreme Court accepts on average just 5 percent of the appeals brought to it annually.

Jump to full article »

• Swedish Match Takes Legal Action Against US Tobacco 

Swedish Match today announced that its fully owned subsidiary Swedish Match North America, Inc. ("SMNA") has filed federal civil antitrust action in the United States District Court for the Western District of Kentucky against U.S. Smokeless Tobacco Company ("USST") and other U.S. Tobacco affiliated companies, seeking a permanent injunction and alleging substantial antitrust damages resulting from USST's use of illegal, exclusionary tactics to suppress competition, raise prices, and stifle innovation in the United States moist snuff tobacco market.

SMNA's suit comes just 2 months after the United States Court of Appeals for the Sixth Circuit upheld a jury verdict awarding $350 million in damages against USST in an earlier suit brought by Conwood Company, L.P., another competitor in the moist snuff market. Under federal antitrust law, these damages are trebled to $1.05 billion.

SMNA's complaint alleges that it suffered damages as a result of USST's conduct, which has continued through the period covered by the SMNA complaint. According to testimony by SMNA executives in the Conwood litigation, USST employed the same tactics it used against Conwood to injure SMNA. The SMNA complaint also alleges that USST targeted the "value priced" Timber Wolf product manufactured by SMNA to the detriment of competition and consumers.

Despite the existence of a federal court order enjoining certain conduct by USST SMNA believes that continuing activities of USST left SMNA no recourse but to institute its own antitrust action

Jump to full article »

New Issue - UST Inc. sells $600 mln in 10-yr notes 

UST Inc. (NYSE:UST), the Greenwich, Connecticut-based holding company for U.S. Smokeless Tobacco, sold $600 million in 10-year senior unsecured notes in the 144a private placement market, said market sources on Wednesday.

The size of the deal was increased to $600 million from an originally planned $400 million.

Jump to full article »

UST Seen Cleaning Its Debt Structure With Bond Deal 

At first glance, UST's bond deal might have been seen as a way for a company to securitize its litigation liabilities and borrow money to repurchase stock - a bane of the bond market. But, in fact, analysts say that the move to shed secured bank credit in favor of unsecured notes is a step towards making its debt structure resemble a company with the high credit rating that UST holds.

"After refinancing, the company intends to resume share repurchases, but has indicated that it will build up a sizable cash reserve and maintain credit metrics consistent with an 'A' rated company," said analysts at Fitch Ratings in a report.

Fitch upgraded UST's credit rating for the notes to single-A. On its existing $440 million of outstanding notes, Fitch upped its rating to single-A from single-A-minus, reflecting the fact that those notes were no longer subordinated to the old secure line of credit.

Jump to full article »

UST to Offer $400 Million of Senior Notes and Intends to Terminate $1 Billion Senior Secured Credit Facility 

UST Inc. (NYSE: UST) announced today that it intends to offer $400 million of 10-year senior notes due 2012. The company intends to repay $326 million of loans outstanding under an existing $1 billion senior secured credit facility, and will use a portion of the proceeds from this offering, together with funds presently held in a restricted account and operating accounts, to fund the balance of the judgment in the Conwood antitrust decision, should it ultimately be required to be paid.

The company also is in the process of negotiating an unsecured line of credit with various financial institutions that will be used to support commercial paper borrowings. Upon successful completion of these financial arrangements, the $1 billion senior secured credit facility will be terminated.

Jump to full article »

• Appeals Court: UST Must Pay $1 Billion  

Greenwich-based UST Inc. must pay $1.05 billion to rival Conwood Co. for monopolizing part of the smokeless tobacco market, a U.S. appeals court ruled, upholding a jury verdict.

Conwood, maker of the Kodiak brand of snuff tobacco, sued UST in 1998. UST makes the Copenhagen and Skoal brands of snuff, which is ground-up moist tobacco that users place between the bottom lip and gum.

Closely held Conwood persuaded jurors that UST, which controls about 77 percent of the snuff market, thwarted competition through exclusive arrangements with retailers and vandalized or removed Conwood store displays.

The three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati said UST's conduct "rose above" isolated activity. The panel upheld a trial judge's decision to triple a $350 million jury award against UST in February 2000. . .

"Even if UST eventually has to pay, the company should have the financial resources to do so," said Bonnie Herzog, a Salomon Smith Barney tobacco industry analyst, who is maintaining a neutral rating on UST shares.

Jump to full article »

Sixth Circuit Court of Appeals Affirms Judgment Against U.S. Smokeless Tobacco Company  

"We are disappointed by the ruling of the three-judge panel. We will pursue an appeal." Vincent A. Gierer Jr., UST chairman and chief executive officer, said. "As we have said before, the company has sufficient cash and credit facilities to fund the judgment if ultimately required." The company plans to hold a conference call Thursday to discuss its next steps and will announce details as soon as they are completed.

Jump to full article »

Tough and triumphant 

Little Tobacco took on Big Tobacco, and won. A jury awarded $42 million in Miami-Dade Circuit Court Wednesday, ending, at least for now, a struggle between mom-and-pop distributor Miami Cigar Co. and U.S. Tobacco, a multimillion-dollar behemoth that Miami Cigar accused of fraud, theft of secrets, and breach of contract.

''This has been the end of some very, very hard years,'' said Mariana Miranda, who owns Miami Cigar with her husband, Nestor. ``We worked very hard to have that company turn around and do what they did.''

A native of Cuba who moved to Miami in 1981, Miranda founded Miami Cigar in 1989 . .

In October, Miranda said she and Nestor drafted a bare bones contract with James McNeill, then president of U.S. Tobacco, to distribute 13 million cigars in 1997, 15 million in 1998 and 17 million in 1999.

But cracks began to appear. By November, fewer and fewer orders were arriving at Miami Cigar's warehouse, and back orders began piling up.

''We were completely in the dark,'' Miranda said. ``We were told by the president of the company that there was no problem, that we were doing a great job.''

But then calls to the company stopped being returned. . .

The Mirandas didn't consider a lawsuit until Nestor received a deposition in 1999 for a suit filed in Chicago against U.S. Tobacco by cigar distributors Cohabaco. A lawyer approached Nestor with some of U.S. Tobacco's internal documents, that, according to Miranda, detailed U.S. Tobacco's plans to obtain Miami Cigar's distribution network all along, going so far as building a storage facility in Tampa to hold cigars originally intended to go Miami Cigars.

Jump to full article »

California agrees to cut smokeless tobacco tax 

U.S. Smokeless Tobacco Co., a maker of moist snuff and other tobacco products, on Monday said California has agreed to lower taxes on smokeless tobacco products after the company and other tobacco firms sued the state to reverse a hike in excise taxes on those products.

The California State Board of Equalization, a state agency that administers tax law, has agreed to settle litigation brought against it by U.S. Smokeless Tobacco and other companies, a company spokesman said.

The plaintiffs called the tax increases -- which raised prices by as much as 150 percent at the retail level -- unprecedented and illegal.

Officials at the State Board of Equalization could not immediately be reached for comment.

News of the settlement buoyed shares of UST

Jump to full article »

• California SBE Agrees to Lower Smokeless Tobacco Tax In Settlement Agreement to End Litigation 

U.S. Smokeless Tobacco Company has announced that the California State Board of Equalization has voted to settle the litigation the company and other parties had brought to overturn an unprecedented and illegal increase in the state excise tax on smokeless tobacco products.

In September, California Superior Court in Sacramento County granted a preliminary injunction to U.S. Smokeless Tobacco Company and its co-plaintiffs, prompting the SBE vote to settle the litigation.

As a result, the state excise tax on smokeless tobacco will return to 52.65 percent of the wholesale price, down from the highest levels ever seen in the state. U.S. Smokeless Tobacco Company will contribute $250,000 on behalf of its loyal adult consumers to the Children and Families First Coalition as part of the settlement agreement.

``We fought this outrageous tax increase on behalf of our loyal adult consumers, because we were convinced that the SBE's action violated California law and was unconstitutional, '' said Murray S. Kessler, president, U.S. Smokeless Tobacco Company. ``We are pleased that the California SBE has agreed to a settlement that will return fairness to the tax structure for smokeless tobacco products in that state.''

Kessler continued: ``It is unfortunate that we had to pursue legal action, but our adult consumers had been targeted for an unfair penalty. In this case, no organization or individual testified in favor of the tax increase. Even the Board's own staff opposed it. We will remain vigilant and will not hesitate to act to defend ourselves and the rights of our adult consumers.''

U.S. Smokeless Tobacco Company's co-plaintiffs in the suit were Core-Mark, a distributor of tobacco products, and the California Association of Retail Tobacconists (CART).

Jump to full article »

• US Smokeless Tobacco Sues To Reverse Calif. Tax Hike 

U.S. Smokeless Tobacco Co. (UST) filed suit in an attempt to reverse a California excise tax hike on smokeless tobacco products.

The maker of Skoal, Copenhagen and other moist tobacco products charges that in raising the rates, the California Board of Equalization acted unconstitutionally and violated California law.

A representative for the Board of Equalization wasn't immediately available to comment.

In a press release Tuesday, U.S. Smokeless said it is seeking a preliminary injunction to halt the new rate until a final judgment is reached.

The company and its co-defendants, tobacco distributor Core-Mark and the California Association of Retail Tobacconists, allege that State Board of Equalization exceeded its authority by leveling a new tax rate on smokeless products that is no longer equivalent to the tax on cigarettes, as required under California law.

Jump to full article »

Kentucky Court Sets Reduced Bond Amount Requirement for UST Inc. in Antitrust Case/UST Will Pursue Appeal to Overturn Judgment 

UST Inc. (NYSE: UST - news) today announced that on August 10, 2000, in ruling on its post-trial motions filed in the lawsuit brought by Conwood Corporation, L.P., the federal district court granted the Company's request that the appeal bond be set substantially below the judgment amount, although it did not vacate or reduce the judgment.

The court also granted to Conwood certain injunctive relief which will not become effective until September 1, prior to which the Company will seek a further stay during the pendency of any appeal. Under the court's order, the bond requirement was set at $500 million, and the Company is proceeding to post the bond.

Jump to full article »

Chewed Up, Spat Out / Playing extra dirty in a nasty business, US Tobacco faces a $1 billion judgment. 

AS MANAGER OF THE Amoco convenience store off I-29 outside Sioux City, Iowa, Gayleen Rusk sees lots of shady characters. Motorcycle thugs, strung-out truckers, drunken teenagers. But the only person who ever destroyed a product display was a sales rep from US Tobacco. Time and again her UST rep would take down the display of a competitor, Conwood, toss it in the dumpster and stick Conwood's products in the rack adorned with UST advertising. . .

If the judgment holds up, it might break UST, which last year earned only $470 million on revenues of $1.5 billion. UST's balance sheet is healthy, but sales growth is slowing, its shares are in steady decline and it's doubtful that UST could borrow $1 billion to pay off its giddy little competitor.

Conwood stands to reap an incredible windfall. Its sales and earnings haven't been divulged since the Pritzker family took it private in a $400 million buyout in 1985

Jump to full article »