Summary
Philip Morris International Inc. (PM) filed an 8-K on July 31, 2008, detailing two significant events. Firstly, the company entered into a Support Agreement to commence a takeover bid for all outstanding common shares of Rothmans Inc. through its indirect subsidiary, Latin America and Canada Holdings Limited. The offer price is CDN $30.00 per share in cash, aiming to acquire Rothmans' 60% interest in Rothmans, Benson & Hedges Inc. (RBH), a Canadian tobacco company. This move is expected to consolidate PM's ownership in RBH, as PM already holds the remaining 40% interest. Secondly, the filing addresses the finalization of a CAD $550 million settlement between Rothmans, RBH, and the Government of Canada, resolving a past investigation into product exports. This settlement necessitates a revision to PM's second quarter 2008 results, including a $124 million after-tax, non-cash charge reflecting PM's 40% share of RBH's settlement portion. Despite this charge, PM reaffirms its full-year 2008 adjusted diluted EPS guidance, projecting growth of 19% to 21%, and anticipates the Rothmans acquisition to be modestly accretive to earnings per share in 2009.
Key Highlights
- 1Philip Morris International (PM) is launching a takeover bid for Rothmans Inc. at CDN $30.00 per share in cash.
- 2The acquisition aims to secure PM's full ownership of Rothmans, Benson & Hedges Inc. (RBH), a Canadian entity where PM already holds a 40% stake.
- 3Rothmans Inc. and RBH have finalized a CAD $550 million settlement with the Canadian government regarding past export investigations.
- 4PM will record a $124 million after-tax, non-cash charge in its Q2 2008 results due to its share of the RBH settlement.
- 5Despite the Q2 charge, PM reaffirms its 2008 full-year adjusted diluted EPS guidance, projecting 19-21% growth.
- 6The acquisition is expected to be modestly accretive to PM's earnings per share in 2009.
- 7Customary conditions for the takeover bid include a minimum tender of 66 2/3% of Rothmans' shares and regulatory approvals.