February 1999
Volume 26
Number 1


Swisher International to Go Private
Pending Approval, Would Purchase Shares at $9.50 Each
Swisher International Group, Inc. announced that its board of directors approved a transaction that will take the company private. Subject to the necessary approvals, the company will merge with its wholly-owned subsidiary, SIGI Acquisition Corporation.

A shareholder vote scheduled for early 1999. Holders of all outstanding shares of the company's Class A Common Stock would receive $9.50 per share, representing a premium of approximately 39% over the Dec. 9 closing price of $6.81.

Swisher International Group, Inc. is the world's largest cigar company, as measured by units sold, and is a significant manufacturer and marketer of smokeless tobacco products.

Swisher announced that net income for the full 1998 was $31.5 million, compared to last year's net income of $39.3 million, a drop of 24.7%. Net sales for the full year were $267 million compared to 1997 net sales of $275.6 million, a decrease of 3.2%.

With executive offices located in Darien, Conn. and operational headquarters located in Jacksonville, Fla., Swisher International Group Inc. markets products under brand names including Swisher Sweets, King Edward, Bering, Silver Creek, and Mail Pouch.

Hollco-Rohr Premium Cigar Sales Transferred to Havatampa

Tabacalera Cigars International (USA) Inc., a subsidiary of Spanish tobacco manufacturer Tabacalera S.A., has transferred the sale of Hollco-Rohr's premium cigars to Havatampa, Inc.

"We have moved all of the cigar inventory to a new 10,000-sq. ft. humidor that we built in our Tampa distribution center," said Peter Strauss, executive vice president of Tabacalera USA. In 1998, Tabacalera S.A. purchased both Hollco-Rohr, based in the Los Angeles suburb of Chatsworth, and Havatampa Inc., (Tampa, Fla.), in addition to manufacturing plants in the Dominican Republic, Nicaragua, and Honduras.

The change, Strauss said, was effective in January. "The logic is that all of the product comes from the Caribbean and Central America," Strauss said. "Traditionally, it was shipped to Miami and then trucked to California, and then half of it would be shipped back east of the Mississippi. All of our shipments will now take place out of Tampa.

"It basically is Hollco-Rohr as it was but it now is a division of Havatampa." Strauss said Hollco-Rohr's 10-member national sales staff will remain unchanged. "The activity of the sales force is not changing at all," he said. Hollco-Rohr will continue to distribute its standard line of accessories, pipes, and Comoy of London products from its California headquarters, Strauss said.

Hollco-Rohr brands include Romeo y Julieta, Romeo y Julieta Vintage, Joya de Nicaragua, Saint Luis Rey, Vueltabajo, Credo, and José Benito, among others. Strauss said the Hollco-Rohr division will also sell Tabacalera USA's new Vega Fina and Quintero brands, as will Havatampa's sales force. — Bob Ashley

Wholesalers Call Tobacco Tax Hike 'Misguided'
Claims White House Disregards Small Business Concerns

The American Wholesale Marketers Association (AWMA) strongly denounced President Clinton's call for a 55 cent-per-pack cigarette tax. David Strachan, president and c.e.o. of AWMA, labeled the President's call as misguided and harmful to small business.

"Once again the President is playing politics. Unfortunately, this time it could have devastating implications on small businesses," Strachan said, citing that 92% of wholesalers in this industry are small businesses, 71% of which employ fewer than 30 people.

"'The President failed to recognize that not only do wholesalers have to pay price increases up-front to cigarette manufacturers, they are also required to pay a floor stock tax on any tobacco products held in inventory on the date of any excise tax increase. This double-hit creates an immediate cash flow problem, since they generally sell cigarettes to their retail accounts on credit. Wholesalers already face federal tax hikes in 2000 and 2002 and both of these increases are accompanied by a floor stock tax," Strachan said.

"It the President is truly concerned about youth access to tobacco products, he should focus his attention on the burgeoning availability of 'gray market' cigarettes sold by import companies. These companies divert cigarettes intended for export onto U.S. streets at significantly lower prices than the current domestic average of $3 per pack. It is unlikely that gray market cigarettes would reflect the President's proposed 55 cent increase," Strachan concluded.

BAT to Purchase Rothmans International
Sale Would Include the Dunhill Cigar Brand

British American Tobacco Plc (BAT) announced on January 11 its intent to purchase Rothmans International for $11.4 billion, joining forces to create a global cigarette giant valued at over $21.3 billion. The deal, which is expected to be completed by the second quarter of 1999, came largely as a surprise to the industry.

British American Tobacco is the third largest cigarette manufacturer in the world, after China National Tobacco Corp. (CNTC) and leader Philip Morris, which holds a 16.7% share of the global cigarette market. BAT's major international brands include State Express 555, Lucky Strike, Kent, Benson & Hedges, Player, and Pall Mall.

Rothmans International, the fifth-largest cigarette producer in the world, produces Dunhill, Peter Stuyvesant, and Winfield. The agreement would unify ownership of Pall Mall, which is currently owned in different parts of the world by both BAT and Rothmans. Swiss-based luxury goods group Compagnie Financiere Richemont AG owns a two-third stake in Rothmans, and South African investment group Rembrandt Group Ltd., holds a one-third stake.

"This merger represents a major step forward in the achievement of our vision to become the world's leading international tobacco company," said BAT chairman Martin Broughton in a statement.

Under the deal, BAT would also take control of the Dunhill cigar brand. Dunhill manufactures premium, hand-rolled cigars in the Dominican Republic, Honduras, and the Canary Islands.

Philip Morris Buys Three Ligget Brands

Philip Morris entered into a $300 million agreement with Liggett Group, a subsidiary of holding company Brooke Group Ltd., to acquire the domestic rights to three cigarette brands: L&M, Chesterfield, and Lark. The move by Philip Morris, which already owned the rights to the brands outside of the U.S., allowed Liggett to join the $206 billion tobacco settlement accepted by state attorneys in November. The settlement required manufacturers holding a market share greater than 1.67% to make cash contributions to the settlement. The deal took Liggett's share below that threshold, while infusing Liggett with needed cash to cover $145 million in debt that was about to come due.

"We believe that the acquisition of these brands domestically makes perfect sense for our business," said Michael E. Szymanczyk, president and c.e.o. of Philip Morris U.S.A. "This transaction provides an opportunity to extend our ownership rights on a worldwide basis."

Philip Morris U.S.A. holds 49% of the domestic cigarette market, producing Marlboro, the largest selling cigarette in the U.S. and the world, Benson & Hedges 100's, Merit, Virginia Slims, Parliament, Basic, Cambridge, and Alpine.

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