$200 BILLION TOBACCO SETTLEMENT EXPECTED

NEW YORK -- Tobacco stocks were mixed Wednesday after reports that the
industry is nearing a $200 billion settlement in the class-action suits
brought by dozens of states and Puerto Rico.

Industry analysts said the mixed reaction came because there were few
surprises in details reported about the pending settlement. Tobacco stocks
have risen in recent days in cautious anticipation of a settlement
announcement, they said.

Sources close to the negotiations between a group of attorneys general from
eight states, including California, and four companies said the deal would
call for the companies to pay about $200 billion over 25 years, including a
large upfront payment, in part to cover costs associated with Medicaid
treatment of sick smokers.

The deal -- now being circulated among other states considering joining the
settlement -- also includes restrictions on advertising and marketing. The
deal could be announced as early as Friday. Participating states are said
to have been given until Nov. 20 to sign on or walk away.

RJR Nabisco Holdings Corp. owns R.J. Reynolds Tobacco Co., the No. 2
tobacco company and maker of the Camel, Winston and Salem brands; Loews
Corp. owns Lorillard Inc., which makes Newport and True; and British
American Tobacco's Brown & Williamson Tobacco Co. makes Lucky Strikes and
Kools.

Last year, states negotiated a $368.5 billion settlement with cigarette
companies that also resolved class-action suits and limited recovery of
damages in individual suits. But the deal fell apart when Congress refused
to back it amid widespread criticism from health groups and some
politicians who called it too lenient on the industry. That proposal had
ballooned to more than $500 billion and included financing a host of
programs not directly related to smoking. The new agreement would not be
subject to approval by the Congress.

Further weakening government's hand, tobacco companies won a key legal
battle as a federal appeals court late Tuesday refused to reconsider a
decision barring the U.S. Food and Drug Administration from regulating
cigarettes and smokeless tobacco. The full Richmond-based 4th U.S. Circuit
Court of Appeals voted 6-3 not to review a three-judge panel's ruling that
struck down the FDA's power in August.

The decision leaves only the possibility of U.S. Supreme Court intervention
in the path of major legal victory for American cigarette makers, who fear
FDA authority over tobacco could eventually allow regulators to dictate how
cigarettes are made. The Justice Department said it would ask America's
highest court to consider the case.

Checked-by: Pat Dolan