GUS shares closed 232.5p higher at 765p. The decision also re-starts the bid timetable and Argos will now publish its final defence document on Friday. THE GOVERNMENT gave the green light to Great Universal Stores' pounds 1.6bn bid for Argos yesterday when Margaret Beckett, President of the Board of Trade, accepted the recommendation of the Office of Fair Trading that the deal did not need to be investigated on competition grounds. We are bitterly disappointed with the White House for not delivering a better agreement."While the McCain bill faces several hurdles, the move by Congress has left a cloud of uncertainty hanging over the industry and it sent tobacco shares skidding in New York.
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Shares in RJR Nabisco, whose subsidiary RJ Reynolds makes Camel cigarettes, and Philip Morris, which makes Marlboro, continued to slide yesterday In morning trading yesterday, Philip Morris was off $1.4375.
On Tuesday, Philip Morris stocks dropped $1.3125 to $41.6875 while shares in RJR Nabisco slid $1.875 to $31.3125. In London BAT shares eased 5.5p to 603.5p.A withdrawal of the tobacco companies from the settlement process could lead to all-out warfare between them and lawmakers, leading to long instability in share prices.The negative sentiment in Congress was vividly demonstrated, meanwhile, by a non-binding resolution that was overwhelmingly passed by senators 79-19 on Tuesday demanding that no legal protections be afforded to the industry.With elections in November, it seems that few in Congress dare expose themselves as friends of the tobacco industry.Outlook, this page. The manufacturers will drop these measures if the wider agreement breaks down.BAT said yesterday it was willing to return to the courtroom to fight lung cancer victims if the deal floundered. It also launched an attack on the White House for failing to back the original agreement.A spokesman for the group said: "At the moment the deal is dead. Instead it would merely set a cap of $6.5bn on civil liability damages that the industry would ever have to pay in one year.Big tobacco companies, including Brown & Williamson, a subsidiary of BAT Industries, warned yesterday that they would not sign the new deal, claiming it would force some manufacturers into bankruptcy.The tobacco companies are likely to walk away from the entire deal if the US Congress is unwilling to compromise - and at the moment it shows no signs of doing so.The tobacco industry is also threatening to take legal action if the US authorities force companies to cut back on cigarette advertising or make them provide extra money to help prevent young people taking up smoking.
In return, they would earn a ban on class-action suits against them as well as immunity from punitive damages for past misconduct.The Senate bill, drafted by Senator John McCain of Arizona, would offer no such blanket immunity. Notably, it strips away most of the legal protections written into the original pact. Under that agreement, the tobacco firms would pay $368.5bn over 25 years and take voluntary steps to curb advertising and reduce smoking among teenagers. THE AMERICAN tobacco industry's landmark $368.5bn (pounds 233bn) settlement with US states was on the brink of collapse yesterday. Cigarette manufacturers threatened to abandon the deal in response to a move by the US Congress to raise the total payment to as much as $600bn amid growing hostility towards the industry. A key committee in the US Senate is set to pass a draft bill which imposes much tougher terms on the tobacco giants and will replace the agreement reached with state attorney generals last June. "A dispute about the vision of the future led to a breakdown in discussions. When asked how such a large merger could have been aborted over the "pecking order of five directors", Sir Richard said that morale in the new company would have been affected if there was not harmony in the boardroom.Although he was guarded in giving reasons for the collapse of the talks, Sir Richard said there was no legal impediment to their re-opening.Sir Richard also denied Glaxo shareholders were in open revolt over the collapse of the talks, which wiped around pounds 14bn off the value of both groups..
But Sir Richard Sykes did not rule out seeking another merger partner after the collapse of talks with SmithKline Beecham and believes that the industry will continue to consolidate In his first public comments since the end of the pounds 100bn merger talks which could have created the biggest drugs group in the world, Sir Richard told the House of Commons Science and Technology Committee that Glaxo would consider seeking other partners if it would enhance the research and development of new drugs. He said the talks broke due to differing cultures and management styles. THE CHAIRMAN of Glaxo Wellcome yesterday said that hostile bids for major pharmaceutical companies were "almost impossible" because of the high stock market valuations across the industry. It was a non-binding resolution but nevertheless it gives a fair indication of the way the smoke is blowing in Congress.Faced with this, the industry has sat back, taken a long drag and decided the settlement is not worth a candle. It will legally challenge some of the provisions but the settlement is increasingly looking dead in the water. Investors have understandably become unsettled and share prices have begun to wobble but nowhere near as much as they would have done had the industry indicated it was prepared to accept the new settlement.BAT, which is number three in the American cigarette market, was already looking at forfeiting most of its US profits to fund the $368m settlement, even with a $1.10 cent hike in a packet of 20. A settlement costing almost twice that would, says BAT, put the industry out of business.That would be one way of cutting smoking.
But it would not help the US government fund the astronomic Medicare bill it already faces to tackle past and present smoke-related illnesses. Smoking kills and there is therefore a lot to be said for Congress playing hardball with the tobacco industry. Particularly since, unlike the situation here, US tobacco taxes do not come remotely close to covering the costs of smoking to the health service.But there is a point at which Congress will kill the goose that lays the golden egg, to the disadvantage of its own public finances and public health That point looks near.. To cap it all, senators yesterday passed a resolution demanding that no legal protection be afforded to the tobacco industry. In return it would get immunity from further legal action and punitive damages for past misbehaviour.It now transpires that the only limit is on legal payouts exceeding $6.5bn a year, that the settlement will not cover class actions brought by litigants other than state authorities and that it will have to meet manadatory targets for curbing teenage smoking. As the Arizona senator John McCain has piloted the Tobacco Bill through Congress, the financial health warning on the side of the package has grown larger and larger. Nine months ago the cost of the 25-year deal to industry was set at $368bn Now it has ballooned to something not much short of $600bn.
