Reynolds American Subsidiary to Receive Payment Following Gallaher Joint-Venture Termination
February 21 2008 - 4:45PM
PR Newswire (US)
WINSTON-SALEM, N.C., Feb. 21 /PRNewswire-FirstCall/ -- Reynolds
American Inc. (NYSE:RAI) announced today that R.J. Reynolds Tobacco
C.V. (RJRTCV), an indirect wholly owned subsidiary of RAI, will
receive a payment of euro 265.0 million (approximately $387.6
million) from Gallaher Limited (Gallaher), a JT International (JTI)
Group company, resulting from the termination of the joint-venture
agreement between RJRTCV and a Gallaher affiliate. In accordance
with the terms of the joint venture, RJRTCV will receive 40 percent
of that total, euro 106.0 million (approximately $155.0 million),
on or before April 20, 2008. Gallaher will pay the remaining 60
percent of the valuation amount in six equal annual installments of
euro 26.5 million (approximately $38.8 million), beginning in April
2009. The dollar values reflect a euros-to-dollars exchange rate of
1.4625, calculated on the morning of Feb. 20, 2008. After
accounting for the company's cost basis and discounting the stream
of future payments, RAI expects the payment to result in a pre-tax
gain of approximately $300 million, which will be recorded in the
first quarter of 2008. The valuation payment results from last
year's termination of R.J. Reynolds-Gallaher International Sarl, a
Swiss joint venture that was formed by RJRTCV and a Gallaher
affiliate in 2002. The joint venture marketed American- blend
cigarettes primarily in Italy, France and Spain. On April 18, 2007,
an affiliate of Japan Tobacco Inc. acquired Gallaher Group Plc,
which constituted a change of control of Gallaher as defined by the
joint-venture agreement. In accordance with the terms of the
agreement, RJRTCV elected to terminate the joint venture prior to
its expiration date. The joint venture was terminated on Dec. 31,
2007. Under the joint-venture agreement, both companies licensed
trademarks to the joint venture. Upon termination of the joint
venture, the party whose licensed trademarks have the greater value
is required to pay to the other party a mutually agreed payment
that is calculated in accordance with the terms and principles set
forth in the agreement. ABOUT US Reynolds American Inc. (NYSE:RAI)
is the parent company of R.J. Reynolds Tobacco Company; Conwood
Company, LLC; Santa Fe Natural Tobacco Company, Inc; and R.J.
Reynolds Global Products, Inc. -- R.J. Reynolds Tobacco Company,
the second-largest U.S. tobacco company, manufactures about one of
every three cigarettes sold in the country. The company's brands
include five of the 10 best-selling U.S. brands: Camel, Kool, Pall
Mall, Winston and Doral. -- Conwood Company, LLC is the nation's
second-largest manufacturer of smokeless tobacco products. Its
leading brands are Kodiak, Grizzly and Levi Garrett. Conwood also
sells and distributes a variety of tobacco products manufactured by
Lane, Limited, including Winchester and Captain Black little
cigars, and Bugler roll-your-own tobacco. -- Santa Fe Natural
Tobacco Company, Inc. manufactures Natural American Spirit
cigarettes and other additive-free tobacco products. -- R.J.
Reynolds Global Products, Inc. manufactures, sells and/or
distributes American-blend cigarettes, including Natural American
Spirit, and other tobacco products to a variety of customers
worldwide. Copies of RAI's news releases, annual reports, SEC
filings and other financial materials are available at
http://www.reynoldsamerican.com/. DATASOURCE: Reynolds American
Inc. CONTACT: Investors: Morris Moore, +1-336-741-3116, Media:
Maura Payne, +1-336-741-6996, both for Reynolds American Inc. Web
site: http://www.reynoldsamerican.com/
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