- A court-appointed mediator in Canada has proposed a C$32.5 billion settlement for Philip Morris (NYSE:PM), British American Tobacco (NYSE:BTI) and Japan Tobacco
- The lawsuits arose in 2015 after a Quebec court awarded damages to more than 100,000 people who claimed the companies knew their products caused cancer and other illnesses without warning consumers
- The allocation of the aggregate settlement amount between the companies in the proceedings is still unresolved
- Shares of Philip Morris are up 0.10 per cent to US$120.26 as of 11:18 am ET. Shares of British American Tobacco are down 2.42 per cent to $34.52 as of 11:59 am ET
A court-appointed mediator in Canada has proposed a C$32.5 billion settlement for Philip Morris (NYSE:PM), British American Tobacco (NYSE:BTI) and Japan Tobacco.
In a news release on Friday, tobacco company Philip Morris stated that the amount will be funded by an upfront payment equal to each of the companies’ cash and cash equivalents on hand in Canada plus certain court deposits for working capital inclusive of cash pledged as collateral and annual payments based on a percentage of the companies’ net income after taxes.
The proposed settlement comes in the wake of lawsuits arising in 2015 after a Quebec court awarded damages to more than 100,000 people who claimed the companies knew their products caused cancer and other illnesses without warning consumers.
After years of mediation, we welcome this important step towards the resolution of long-pending tobacco product-related litigation in Canada,” Jacek Olczak, CEO of Philip Morris, said in a statement. “Although important issues with the plan remain to be resolved, we are hopeful that this legal process will soon conclude, allowing RBH and its stakeholders to focus on the future.”
An appeal was made in 2019, however Quebec courts upheld the 2015 decision that awarded consumers in the province C$15 billion, leading the subsidiaries of the companies to seek bankruptcy protection.
In its own news release, British American Tobacco stated that in March 2019, its Canadian subsidiary Imperial Tobacco Canada Ltd. obtained creditor protection under the Canadian Companies’ Creditors Arrangement Act and has since been negotiating a possible settlement of all of its outstanding tobacco litigation in Canada.
“The plan resolves all Canadian tobacco litigation and provides a full and comprehensive release to Imperial, BAT and all related entities for all tobacco claims,” British American Tobacco’s subsidiary said in a statement. “This settlement will be funded by the cash on hand and the cash generated from the future sale of tobacco products in Canada while at the same time maximizing recovery for the creditors. It also allows the Canadian tobacco companies to continue operating as a going concern for the benefit of all stakeholders.”
Philip Morris claims the allocation of the aggregate settlement amount between the tobacco companies is still unresolved.
The proposed plan is subject to any additional negotiations made by the parties and court orders, voting by claimaints and approval of the court. Voting is scheduled for December 2024 and if accepted, a hearing to put in place the proposed plan would come in the first half of 2025.
Shares of Philip Morris (NYSE:PM) are up 0.10 per cent to US$120.26 as of 11:18 am ET. Shares of British American Tobacco (NYSE:BTI) are down 2.42 per cent to $34.52 as of 11:59 am ET.
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