Key Issues

• Rothmans, Benson & Hedges (RBH) is Canada’s second-largest tobaco manufacturer, with factories in Quebec City and Brampton, Ontario.
• RBH has two shareholders: Rothmans Inc., which owns 60% of the company, and Swiss-based FTR Holding S.A., a branch of the Philip Morris family, which owns the remaining 40%. Philip Morris is the world’s largest tobacco multinational.
• Unlike RBH, Rothmans Inc. is publicly traded. Small shareholders own 28.8% of Rothmans Inc. shares. The remaining 71.2% belong to Rothmans of Canada Limited, which is owned 100% by Rothmans Partnership in Industry Canada Limited, which in turn is owned 100% by Dutch-based Rothmans International.
• Rothmans International has merged with London-based British American Tobacco (BAT), which controls Imperial Tobacco of Canada. Since this gives BAT a market share of around 90% in the Canadian cigarette market, BAT has committed itself to selling off its share of RBH by June 7, 2000. (See Competition Tribunal Consent Order, dated Aug. 6, 1999 — British American Tobacco p.l.c. CT-99/01.)

The proposal being voted on at the Jan. 17, 2000 meeting would essentially eliminate the intermediate holding companies, so that 71.2% of Rothmans Inc. would belong directly to Rothmans International. This is a prelude to Rothmans International selling off its Canadian interests.

• On Dec. 22, 1999, BAT announced that it was giving up on attempts to sell its Rothmans Inc. stake to a single corporate buyer, and would instead be disposing of its interest via a secondary offering, i.e. by putting shares up for sale to the public.