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February,
2005

TOBACCO INDUSTRY NEWS

Swedish Match to Acquire Remaining Ownership in General Cigar Company
Cullman Family Era Draws to a Close; Will Leave By Year-end


Swedish Match A.B. of Stockholm, Sweden announced on Feb. 22 that it has agreed in principle to acquire all outstanding shares of General Cigar Holdings currently owned by the Cullman family. Under the transaction, which is expected to be complete by April 1, Swedish Match will own 100 percent of General Cigar. Currently, Swedish Match owns 64 percent, while 36 percent of the company is owned by the Cullman family.

General Cigar produces the number one selling premium cigar in the United States, Macanudo, and nearly two dozen other premium brands including Partagas, Punch, and Hoyo de Monterrey. The company traces its roots to 1906, and has been managed by the Cullman family since 1961. General Cigar is the market leader in premium cigars in the U.S., and is one of the leading growers of high-quality Connecticut shade wrapper. The company owns factories in Honduras and the Dominican Republic, over 1,100 acres of Connecticut Valley farmland, and the Club Macanudo cigar bar in New York.

"The Cullman family has provided excellent management and developed the premium cigar business in the U.S. We look forward to further developing our cigar businesses, with the exceptionally strong brands of General Cigar, and to further grow our premium cigar presence in both the U.S. and internationally," said Sven Hindrikes, president and c.e.o. of Swedish Match AB.

The Cullman family will participate in the transition of the day-to-day operations to Swedish Match for the remainder of the year, but will no longer be involved with the company after that. While wholly-owned by Swedish Match, General Cigar would continue to be managed as a separate commercial unit. Swedish Match's U.S. division, Swedish Match North America, is based in Richmond, Va., but the company indicated there are no plans to move General Cigar's headquarters from New York City.

"The management of General Cigar is extremely proud of the successful business our people have helped to create and we are confident that the business will have an exciting and prosperous future under the management of Swedish Match," said Edgar Cullman, Jr.

No purchase price for the remaining shares was announced, but will be established under the call provisions of an existing shareholder agreement between Swedish Match and the Cullman family.


U.S. Tightens Ban on Cuban Cigars, Home and Abroad

Washington - The federal government has tightened its ban on Americans importing Cuban cigars. "There is now an across-the-board ban on the importation of Cuban-origin cigars," said a notice released by the Treasury Department's Office of Foreign Assets Control.

Previously, the rules allowed Americans licensed to travel to Cuba to bring back to the United States up to $100 worth of Cuban goods, including cigars. That loophole was closed in the latest regulations.

Americans are already barred from buying a Cuban cigar in other countries, even to smoke it outside the United States - a little known fact among American travelers.

"The question is often asked whether United States citizens or permanent resident aliens of the United States may legally purchase Cuban goods, including tobacco and alcohol products, in a third country for personal use outside the United States," the notice said. "The answer is no."

Breaking the rules can lead to criminal penalties, including fines of up to $1 million for corporations and $250,000 for individuals and up to 10 years in prison, the department said.


Ottawa Introduces Self-extinguishing Cigarette Rules

Ottawa - All cigarettes meant for sale in Canada will soon have to be designed to go out when left unattended, the federal health minister said as he introduced new rules aimed at reducing house fires.

Ujjal Dosanjh has introduced Health Canada regulations requiring "reduced ignition propensity" cigarettes by October 2005, following through on a Liberal backbencher's private member's bill from last spring. "We will be the first country to have a national standard to reduce the fire risk of cigarettes," Dosanjh said as he announced the new regulations.

Some tobacco makers have argued against the measure, saying smokers will have to relight their cigarettes more often. A relit cigarette tastes bad, they said, so smokers will either roll their own or buy illegally imported American cigarettes to avoid the reduced-ignition smokes.


Xikar Adds UPC Bar Coding to Cutters, Knives

Kansas City, MO - Xikar, Inc., a leading manufacturer of cigar cutters and tools, is adopting UPC bar coding on its complete line-up of Xi cutters, tools, and pocket folder knives. This enhancement will provide Xikar retailers with detailed product information, inventory management, and quick point-of-sale transactions.

"This move will streamline and simplify the sales process among Xikar retailers," said Kurt Van Keppel, company president and co-founder. "Our goal is to make selling, stocking, and ordering Xikar products as seamless as possible." With UPC membership requirements to get the bar codes, the process has been both lengthy and costly, but necessary, Van Keppel explains.

"We're committed to our retailers, committed to growing our brand," says Van Keppel. "Adding UPC codes is a significant step forward."



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