BUYOUT COULD SNUFF RJR ADS;LIGGETT OWNERS OK OF CURBS ADDS CHILLING PROSPECTS TO PROXY FIGHT

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It could be goodbye Joe Camel and goodbye, too, to R.J. Reynolds Tobacco Co.'s $141 million in image advertising for cigarettes if Bennett LeBow wins control of RJR Nabisco Holdings following a stunning deal last week to settle a tobacco liability lawsuit.

According to lawyers involved in the case, the same advertising curbs-including a ban on cartoon characters-that Brooke Group Chairman LeBow agreed to abide by for his Liggett Group tobacco subsidiary would automatically extend to RJR if Mr. LeBow wins his current proxy fight for control of RJR Nabisco, spins off its Nabisco business and then merges Liggett and RJR.

UNDERMINING BID FOR RJR

For that reason, several analysts say the Liggett settlement could undermine Mr. LeBow's bid for RJR, and tobacco industry rivals were quick to lay blame for Liggett's deal on the larger fight for control of RJR.

However, even if he won control, spokesmen for Mr. LeBow cautioned there was no guarantee Liggett would merge with RJR as had been widely expected. As a separate company-even if controlled by Brooke-RJR might be able to continue all its current advertising.

WHEN AFFECTED?

Bob Lieff, a San Francisco lawyer who negotiated the provision on behalf of the plaintiffs, said RJR would be affected only if it became part of Liggett. However, a plaintiff's news release said RJR would be affected as soon as Mr. LeBow got control and Nabisco was spun off.

Most of the curbs Liggett agreed to were a shock in a tobacco industry that up to now has been united in its stand against liability lawsuits.

Brooke Group agreed to pour a portion of its profits into tobacco abuse agreed to a series of steps to change its advertising, including:

Eliminating any cartoon advertising.

Eliminating outdoor advertising within 1,000 feet of a school or playground.

Replacing all image advertising over the next five years in publications with more than 15% readership by under-18-year-olds with text-only b&w tombstone advertising.

Eliminating sampling in areas in which children are present.

All these provisions are being sought by the Food & Drug Administration in proposed rules the tobacco industry has generally opposed.

Also, on Friday Liggett broke ranks with rivals by agreeing to pay five states a portion of the money they spend treating Medicaid patients. That was the first money tobacco companies have paid despite numerous lawsuits.

LITTLE EFFECT ON LIGGETT

Despite the scope of the settlement, it would have little direct effect on Liggett, which has no ad agency and advertises little. According to Competitive Media Reporting, Brooke Group spent $16,000 on media last year for its brands, which include Eve and L&M in the premium field, and a private-label business that accounts for much of its volume.

Liggett saw its market share fall to 2.7% last year, according to analyst John C. Maxwell Jr. at Wheat First Butcher Singer.

At RJR, however, the provisions would have significant effect-so significant that some analysts say Mr. LeBow may have killed any chance for winning control of RJR.

"I don't think anybody in their right mind who owns RJR wants any part of this," Mr. Maxwell said. "It will turn a lot of people off."

RJR's main tobacco agencies include Mezzina/Brown, New York, and Trone Advertising, Greensboro, N.C.

UNABLE TO COMPETE

Marketing consultants and ad executives say RJR would be unable to compete if it faced severe advertising restrictions while Philip Morris USA, Brown & Williamson Tobacco Corp. and Lorillard faced no similar limits.

"It would be extremely debilitating," said Bob Lepre, principal in the New England Consulting Group. "Restrictions in this industry are so great as it is, that you are struggling for an edge. One of the edges is what the advertising looks like and how it breaks through the clutter. They would be severely hampered."

RJR itself declined to discuss the prospect but said in a statement it suspected Mr. LeBow's settlement was "an irresponsible and reckless play to influence RJR Nabisco shareholders."

RIVALS STAND FAST

Other tobacco companies were quick to say they had no intention of making similar settlements. Brown & Williamson noted that the settlement would be mostly negated if tobacco companies won their suit against the FDA regulations, and also suggested the proxy battle was the motivator.

Tobacco critics were quick to praise the settlement, though even they cautioned that, while a precedent, it may not have a major effect on tobacco marketing.

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