The proposed $49 billion acquisition by British American Tobacco PLC (NYSEMKT: BTI) of the 58% of Reynolds American Inc. (NYSE: RAI) that it does not already own will, if approved, create the world’s largest publicly traded tobacco company by both revenue and market cap. It will also create the biggest target for more lawsuits related to the harmful effects of tobacco use.
Last May, the family of Hall of Fame Major League Baseball player Tony Gwynn sued Altria Group Inc. (NYSE: MO), claiming the company was responsible for Gwynn’s wrongful death because it had manipulated him into an addiction to smokeless tobacco. According to the lawsuit, Gwynn used one and a half to two cans of Altria’s Skoal every day for 31 years, the equivalent of four to five packs of cigarettes, beginning when the player was a student at San Diego State University in 1977. Gwynn died of salivary gland cancer in 2014 at the age of 54.
Product liability concerns and wrongful death claims against tobacco companies continue to be filed even though several major tobacco companies in 1999 settled a class-action lawsuit by the attorneys general of 46 U.S. states for a total of $206 billion to be paid over 25 years.
Five years before the settlement was reached, a class-action suit in Florida known as the Engle Progeny case was decided in plaintiff’s favor along with an award of $145 billion in damages. The penalty was thrown out on appeal, but the state’s top court allowed individual cases to proceed and the individual cases were permitted to use the jury findings from the class action suit.
As of mid-2015 about 3,100 of these Engle cases were still pending in Florida courts and there were others being tried in federal courts. Reynolds, Lorillard and the Philip Morris USA division of Altria paid out about $100 million to settle most of their federal Engle litigation in 2015.
But fear of lawsuits, which caused BAT, as the British company is known, to sell its Brown & Williamson business to Reynolds American in 2003 has taken a backseat to fears of being left behind in the consolidation of the tobacco business. Higher taxes, more public education, restrictions on advertising and packaging, all contribute to a reduction in the number of tobacco users. As, of course, do deaths related to tobacco use.
According to a World Health Organization (WHO) report, 22.1% of the world’s population smoked tobacco in 2010, and WHO forecasts that number to decline to 18.9% by 2025. The overall reduction totals 14%.
Globally about 6 million people die every year as a result of smoking or using smokeless tobacco according to WHO. The 2014 U.S. Surgeon General’s report estimated that half a million Americans would die that year from smoking.
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