Rothmans Inc. announces resolution of RCMP investigation

    Trading: TSX: ROC

    TORONTO, July 31 /CNW/ - Rothmans Inc. announced today that an agreement
has been reached with the Government of Canada and the governments of all ten
provinces that resolves the RCMP's investigation relating to sales of products
exported from Canada by Rothmans, Benson & Hedges Inc. ("RBH") in the period
1989 - 1996. Under the terms of the comprehensive agreement, payments expected
to total C$550 million are to be made commencing in 2008 and over the next ten
years. As part of the overall resolution, RBH has entered a plea of guilty to
a single count of violating a provision of the Excise Act (Canada).
    As previously disclosed, the RCMP investigation related to allegations
that some of the tobacco products manufactured and exported by RBH were
illegally smuggled back into Canada without payment of applicable excise and
tobacco taxes and duties. RBH and Rothmans Inc. have agreed to this overall
resolution in order to bring closure to this legal matter and to put an end to
the uncertainty and burden on the companies arising from the RCMP's

    The terms of the settlement require the following payments to be made:

    -   $100 million fine payable by RBH by no later than October 29, 2008;
    -   $50 million towards a new government Contraband Tobacco Enforcement
        Strategy payable by RBH no later than December 15, 2008;
    -   $200 million payable by Rothmans Inc. over 10 years at a rate of $20
        million per year with the first payment to be made by December 31,
    -   an estimated $200 million payable by RBH, with the first payment of
        $50 million to be made no later than December 31, 2008 and the
        remainder scheduled to be paid over a 10-year period based on a
        formula related to the revenue of RBH set out in the comprehensive

    In conjunction with the resolution of this matter, RBH expects to repay
its currently outstanding 5.552% Senior Unsecured Bonds in the principal
amount of C$150 million (the "Bonds"). Although the Bonds have a scheduled
maturity date of December 21, 2011, the terms of the settlement may result in
an event of default under the terms of the trust indentures pursuant to which
the Bonds were issued.
    RBH has entered into an agreement with JP Morgan Chase Bank, N.A. for a
one-year revolving loan facility in the principal amount of C$200 million. The
proceeds of the loan facility will be used for purposes of funding the
repayment of the principal amount of the Bonds together with accrued interest
and the make-whole premium of approximately C$10 million required under the
terms of the trust indentures and for RBH's working capital requirements.
    It is expected that a charge of approximately C$420 million will be
recognized by Rothmans Inc. on a consolidated basis in the quarter ended June
30, 2008 in connection with the settlement. Under the terms of the
comprehensive agreement neither Rothmans Inc. nor RBH are permitted to deduct
any of the payments from income in determining their respective income tax
liability to government authorities.
    The resolution of the RCMP investigation was a condition of an agreement,
also announced today, by Philip Morris International Inc. to make an offer to
purchase all outstanding shares of Rothmans Inc. at a price of $30.00 per
share. Details of this offer are contained in a separate press release issued
by Rothmans Inc. concurrently with this release.
    The settlement by Rothmans Inc. and RBH was concluded contemporaneously
with a similar settlement by Imperial Tobacco Canada Limited.
    The above is a summary of the settlement. This summary is qualified in
its entirety by the filings made by Rothmans Inc. with securities regulatory
authorities with respect to the settlement, which are available on SEDAR at and on the Rothmans Inc. website at

    Forward Looking Statements

    Certain statements contained in this release constitute "forward-looking
statements" and express views as to future events, circumstances and trends
relating to the business of RBH and Rothmans Inc. Words such as "plans,"
"intends," "outlook," "expects," "anticipates," "estimates," "believes,"
"should" and similar expressions may identify forward-looking statements.
Forward-looking statements are based on management's current expectations and
assumptions and entail various risks and uncertainties. There is no assurance
that any forward-looking statement will materialize. Actual results may differ
materially from these expectations and forward-looking statements, if known
and unknown risks or uncertainties affect RBH's business or Rothmans Inc., or
if management's expectations or assumptions prove to be inaccurate. Factors
that could cause actual results to differ materially from the forward-looking
statements contained herein include, but are not limited to: RBH and Rothmans
Inc.'s abilities to fund the payments required under the terms of the
settlement: RBH's ability to fund the repayment of the Bonds: and final
confirmation of the charges to be recognized by Rothmans Inc. in connection
with the settlement and the repayment of the Bonds. Rothmans Inc. disclaims
any obligation or intention to update or revise any forward-looking statement,
whether the result of new information, future events or otherwise, except as
otherwise required by applicable law. Additional information concerning risks
and uncertainties affecting Rothmans Inc. and RBH is contained in the
Company's filings with the Canadian securities regulatory authorities,
including the Company's Annual Information Form (in particular under "Legal
Proceedings" and "Risk Factors") available on SEDAR at or on the
Company's website at

For further information:

For further information: Barry Joslin, (416) 442-3634

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