Tobacco.org

• Marquee Food-Tobacco Deal, With Lawsuit Rears Lurking 

The complex transaction by which Philip Morris, the nation's largest cigarette company, will buy Nabisco -- a company that used to be part of a company that owned Reynolds, the No. 2 cigarette maker -- is a monument to the fear that class-action suits will drive the tobacco companies into bankruptcy.

That is the part of this arrangement that gives the deal its most unusual aspect: the gift of $1.4 billion to $1.5 billion in cash to R. J. Reynolds. That reflects the possibility that Nabisco Group Holdings, as the former corporate parent of Reynolds, may have a residual liability for Reynolds debts if Reynolds is driven into bankruptcy by tobacco litigation. . .

Now Philip Morris will own a huge food company, composed of its old Kraft and its new Nabisco units. It plans to sell a minority stake in that to the public. When that happens, it will become clear that Philip Morris, like RJR Nabisco before it, is worth less than the sum of its parts. Then, Wall Street will start talking about how to realize the value of that food operation.

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