July 31, 2008 - Toronto based Rothmans Inc. announced on Thursday, 7/31/2008 it has agreed to a friendly takeover by American tobacco giant Philip Morris International PMI) for a $2 billion all cash offer. The deal will add sales of about 11 billion cigarettes (a third of Canada's cigarette market) and expand PMI's discount brands.
The deal was contingent on the resolution of an on-going RCMP (Royal Canadian Mounted Police)investigation against Rothmans that concluded on Thursday, 7/31/2008. Rothmans agreed to pay the federal government $550-million over the next decade after the company "entered a plea of guilty to a single count of violating a provision of the Excise Act" relating to smuggling allegations, it said. Imperial Tobacco Canada Ltd., the biggest tobacco company in the country also pleaded guilty today.
The deal gives Philip Morris the remaining 60% stake in Rothmans Benson & Hedges Inc (the operating subsidiary of Rothmans Inc), Canada's second largest cigarette maker. Philip Morris already owned the other 40%. Philip Morris expects to complete the transaction by Sept. 30.
Rothmans generated revenue of $670.6 million in the year through March, 8.4 percent higher than a year earlier after the maker of Benson & Hedges and Dunhill cigarettes raised prices and boosted shipments of discount brands Accord and Quebec Classique.
References: Philip Morris to Buy Canada's Rothmans for $2 Billion" by Chris Burritt, Bloomberg.com, 7/31/2008; Rothmans stock jumps 13% on Philip Morris offer by David Pett, nationalpost.com, 7/31/2008 and Rothmans to be inhaled by Philip Morris in $2-billion deal: $30 per share, by Gary Norris And Eric Shackleton, The Canadian Press, 7/31/2008.
Big Tobacco - Canada