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Oct./Nov.
2000

RETAILER & TOBACCO INDUSTRY NEWS

Havana Group Completes Phillips & King Purchase

NORTH CANTON, OH - The Havana Group, Inc. has completed its purchase of California-based distributor Phillips and King International, Inc. The acquisition closed Friday, August 4, 2000.

The acquisition is expected to increase sales over 1,000% to approximately $15 million per year, add over 3,500 products to the company’s product lines, and expand distribution methods to include wholesale operations, according to The Havana Group.

Phillips and King International, Inc. currently employs nine field sales personnel and distributes its products in all 50 states from its single location in City of Industry, California. The company maintains approximately 3,000 accounts.

Terms of the deal included a $900,000 cash payment and the assumption of liabilities estimated at $1.96 million.

In 1999, Cuba Libre Humidors, Inc. was awarded a judgement of $1.8 million against Phillips & King based on its claim of breach of verbal contract for the monthly supply of humidification units to the California-based distributor. Phillips & King has operated under Chapter 11 bankruptcy protection since the judgement. The Cuba Libre action was settled on August 4, as part of the bankruptcy reorganization plan, involving total payments of $825,000 plus interest due in installments until 2005.

In conjunction with the Phillips & King purchase, The Havana Group entered into 90 day transitional consulting contracts with John Parker and Jerry Christenson, former P&K owners, as well as two-year non-compete agreements.

Phillips & King was founded in 1906 by Harry Phillips (photo, at left) and Harold King as a single tobacco store in Los Angeles. It grew to 14 stores, which were all sold in 1939, at which time it became a wholesale distributorship. In 1975, candy and domestic cigarettes were divested to focus soley in specialty imported tobacco products. In 1990 P&K purchased the National Cigar Co.


Colibri Obtains Injunction for Copyright Infringement

PROVIDENCE, RI - In June, Colibri Corporation obtained a $75,000 final judgment and permanent injunction against KingStar Supplies, Inc. an importer and wholesaler of tobacco-related products from Torrance, California, in connection with a lawsuit for patent, trademark, and copyright infringement.

The judgment and permanent injunction, agreed to by the parties and entered by the federal district court in Los Angeles, culminates three months of litigation, and orders KingStar to stop selling cigarette, cigar, and pipe lighters and humidors that infringe Colibri’s patents, trademarks, and copyrights. In the lawsuit, Colibri claimed that KingStar made, used and/or sold four models of cigarette, cigar, and pipe lighters, each of which is virtually indistinguishable for Colibri’s design patents. The Court ordered KingStar to stop manufacturing, using, selling, or importing any lighter which is substantially similar to Colibri’s.


TPN Buys Back U.S. Rights to Joya de Nicaragua; S.A.G. to Distribute

MANAGUA, NICARAGUA - Tobacos Puros de Nicaragua (TPN) has agreed to repurchase the rights to the Joya de Nicaragua brand for the U.S. market from Altadis U.S.A., Inc. The brand, formerly owned by Hollco-Rohr (subsequently a unit of Havatampa merged into Altadis U.S.A., Inc.), was introduced in the 1970s. The brand contains two lines: a milder Ecuadorian-grown Connecticut-seed wrapped version, and a full-bodied maduro.

With the purchase, TPN has completed the consolidation of all its rights on the exclusive trademark Joya de Nicaragua in all countries around the world. Dr. Alejandro Martinez, president and owner of TPN said, “We are looking to regain our market share in the U.S. now that we have consolidated the ownership of our brand.”

S.A.G. Imports, Inc. of Miami will be the exclusive distributors of the Joya de Nicaragua brand, Tel.: (800) 272-5396.


Courts Uphold Massachusetts Tobacco Ad Rules,
But Toss Ingredient Disclosure Law


BOSTON, MA - A federal appeals court has upheld most of the strict regulations on tobacco advertising imposed by the state of Massachusetts last year, concluding they do not violate the free speech right of tobacco companies.

The ruling largely upheld lower court rulings against cigarette, smokeless tobacco, and cigar companies that sued over the state’s health-warning label requirements and bans on outdoor advertising and advertising within 1,000 feet of schools and playgrounds. However, the court said the state attorney general would have to reformulate regulations governing cigar advertising. The state cannot regulate such advertising on Web sites or in national magazines distributed in Massachusetts, the court ruled. Nor can it hold manufacturers responsible if their products are sold in Massachusetts, even by a third party, without the required warning label.

Major cigarette manufacturers, as well as several cigar and tobacco exporting companies, argued that the regulations were pre-empted by federal law and violated the First Amendment. But the court ruled that Congress had not intended for the Federal Cigarette Labeling and Advertising Act to stop states from imposing their own regulations, and the regulations do not violate free speech rights because they are “proportionate to the state’s purposes.”

Separately, a federal judge declared Massachusetts’ law requiring tobacco companies to list the ingredients of their products unconstitutional, saying it forces the companies to give away their trade secrets.


800-JR Cigar Goes Private

WHIPANY, NY - 800-JR Cigar, the largest retailer and distributor of cigars in the U.S., signed a definitive agreement on August 28th to be acquired by JRC Acquisition Corp., a wholly-owned subsidiary of L&LR, Inc., which in turn is owned by Lew and LaVonda Rothman.

On September 26th, JRC completed its tender offer to acquire all outstanding shares of common stock of 800-JR-Cigar that were not already owned by the Rothman family or associated trusts for $13.00 per share. The offer represented a 26.5% premium over the average per-share during the 30-day period prior to the announcement. Prior to the tender, the Rothmans owned 9.3 million, or 78.4%, of the company’s common stock. Following its purchase of approximately 1.8 million shares, JRC and related trusts owned approximately 93.6% of the total issued and outstanding shares of common stock. The acquisition allows 800-JR Cigar to become a private company.

800-JR Cigar, which is listed under the symbol JRJR on the NASDAQ exchange, was the first U.S. cigar retailer to go public, completing its IPO in June 1997 at $17 per share, raising $56 million. After reaching a high of $38.75 in late 1997, JRJR stock fell to a record low of $7.25 per share in early 1999.



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