London-Based Imperial Brands, WWP (And U.S.-Based Subsidiaries Y&R And Burson Cohn Wolfe), Havana-Based Habanos Sued Using Libertad Act: EU Asked To Respond
/The defendants: Bristol, United Kingdom-based Imperial Brands (2019 revenues approximately US$36 billion); Havana, Republic of Cuba-based Corporacion Habanos S.A. (2019 revenues approximately US$531 million); London, United Kingdom-based WWP PLC (2019 revenues approximately US$13 billion) and two of its United States subsidiaries: New York, New York-based Burson Cohn Wolfe (2019 revenues approximately US$691 million) and New York, New York-based Young & Rubicam LLC (2019 revenues approximately US$556 million)
LUIS MANUEL RODRIGUEZ, MARIA TERESA RODRIGUEZ, a/k/a MARIA TERESA LANDA, ALFREDO RAMON FORNS, RAMON ALBERTO RODRIGUEZ, RAUL LORENZO RODRIGUEZ, CHRISTINA CONROY, and FRANCISCO RAMON RODRIGUEZ, Plaintiffs, v. IMPERIAL BRANDS PLC, CORPORACIÓN HABANOS, S.A., WPP PLC, YOUNG & RUBICAM LLC, and BCW LLC, a/k/a BURSON COHN & WOLFE LLC [1:20-cv-23287; Southern Florida District].
Berenthal & Associates (plaintiff)
Rodriguez Tramont & Nunez (plaintiff)
Nelson Mullins (defendant)
Allen & Overy (defendant)
Wilmer Cutler Pickering Hale and Dorr (defendant)
Broad & Cassel (defendant)
Akerman (defendant)
Filing Links
Complaint (6 August 2020)
Defendant Imperial Brands PLC’s Opposition To Motion To Strike The Declaration Of Andrew Rhys Davies
Defendant Imperial Brands PLC’s Motion For A Limited Stay
Reply In Further Support Of Defendant Imperial Brands PLC’s Motion For A Limited Stay
Order Denying Motion To Vacate Stay
EU Template For Applications For Authorizations
Excerpts From Complaint
After taking control of power in 1959, the Castro Regime and Cuba’s communist government systematically “nationalized” the major privately-owned business enterprises in Cuba without compensation to the lawful owners of the property. In 1961, as part of its takeover of the entire tobacco industry, the Castro government confiscated ownership of RRHSC and the RRHSC Property. Before the RRHSC Property was confiscated, the Partagás Factory produced world renowned cigarettes under the Partagás brand and had grown to become the third largest manufacturer of cigarettes in Cuba with a 16.3% share of the market.
In 2007, Defendant Imperial Brands PLC (“Imperial”), well-aware of the Liberty Act, purchased Altadis S.A. and its “50% ownership interest in [Habanos], a company which distributes cigars manufactured in Cuba.”7 Corporacion Habanos S.A. (“Habanos”) is a joint venture company 50% owned by Cuba, or one or more Cuban-owned companies, and 50% owned by Imperial.
Imperial and its partner Tabacuba, together with the subsidiaries they own and control, have expanded their use of and benefit from the RRHSC Property by retaining agents to market and publicize the products produced at the confiscated RRHSC Property. The agents retained by Imperial and Habanos include Defendant WPP PLC (“WPP”) through its U.S-based advertising agency subsidiaries, Defendants Young & Rubicam LLC (“Y&R”), and BCW LLC, a/k/a Burson Cohn & Wolfe LLC (“BCW”).
9. Beginning no later than 2017, Y&R and BCW assisted in setting up, or directly set up, sponsored official “portals” for Imperial to market Habanos products on the U.S.-based social media platforms Twitter, YouTube, and Instagram.
10. Imperial’s agent, WPP, through Y&R, BCW, and previously through a third WPP subsidiary, Ogilvy, has continuously marketed and publicized the RRHSC Property and the Habanos’ products made at and shipped from there since at least 2010.
For the first time, a Libertad Act lawsuit has a transnational dimension because of a decision by a judge of a United States District Court to recognize the appropriateness of international comity- the principle that United States courts should recognize a foreign country’s sovereign interests in matters before it. Mr. Hermenegildo, Altozano, attorney with Madrid, Spain-based Bird & Bird, informed the court that “On April 15, 2020, I filed an Application for Authorisation under Article 5 paragraph 2 of Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom, on behalf of the Spanish company Iberostar Hoteles y Apartamentos S.L.U. ("Iberostar").”
Imperial Brands PLC agrees sale of Worldwide Premium Cigar Business for €1,225 million with proceeds to be used to reduce debt (8 October 2020)
Imperial Brands PLC (“Imperial”) is pleased to announce it has agreed the sale of its worldwide premium cigar businesses (“Premium Cigars”) to investment consortia of individual investors in two distinct transactions for a total consideration of €1,225 million (£1,074 million), which represents a multiple of 11.8x FY19 EBITDA on a standalone basis. The disposal reinforces Imperial’s focus on simplifying its business and realising value for shareholders. The sale multiple recognises the luxury nature of the businesses’ products and their international growth profile. After adjusting for tax and other costs, the disposals are expected to realise net cash proceeds of around €1,094 million (£958 million). The proceeds will be used for debt reduction and will reduce September 2019 pro-forma net debt to EBITDA leverage by c 0.2 times.
Joint Interim Chief Executives Dominic Brisby and Joerg Biebernick said: “We are delighted to be able to announce the sale of Premium Cigars in the current challenging global environment. It has been a complex transaction involving joint venture partners and assets across multiple geographies and we would like to thank everyone involved for working so hard to get the deal agreed.”
“This disposal reinforces our strategic ambition of becoming a leaner and more agile organisation and the proceeds will realise value for shareholders by reducing debt as part of our ongoing focus on active capital management.”
“We believe we have found the right long-term owners for Premium Cigars; they are committed to investing in the business to maximise future growth opportunities and are well positioned to further develop operations internationally.” The sale will take place in two transactions documented under two sale agreements: one for the USA business (“Premium Cigar USA”); and another for the Rest of the World business (“Premium Cigar RoW”). In respect of the transactions:
Gemstone Investment Holding Ltd will acquire Premium Cigar USA for a total consideration of €185 million (£162 million). This transaction is subject to the fulfilment of certain conditions, including customary antitrust and other regulatory clearances. Allied Cigar Corporation, S.L will acquire Premium Cigar RoW for a total consideration of €1,040 million (£912 million). This transaction is subject to the fulfilment of certain conditions, including customary antitrust and other regulatory clearances. The transactions are expected to close in the third quarter of calendar year 2020. The Premium Cigar RoW transaction includes the sale of the Dominican Republic handmade premium cigar factory which is expected to close in 2021.
Of the Premium Cigar RoW transaction consideration, €88 million (£77 million) will be deferred for 12 months from close and €69 million (£61 million) will be deferred and contingent upon transfer of the Dominican Republic factory. The Premium Cigar business contributed £80 million of profit before tax in the year to 30 September 2019. The business comprises assets that are wholly owned as well as investments in a number of joint ventures, which results in a different accounting treatment for the two asset types: The wholly owned assets represented £226 million of net revenue and £30 million of adjusted operating profit of the Africa, Asia and Australasia division for the year to 30 September 2019. Our investments in the Premium Cigar joint ventures are accounted for using the equity method and our share of the profit after tax is £50 million for the year to 30 September 2019.
Pro-forma earnings dilution in the financial year to 30 September 2019 is around 6 pence per share*. As at 30 September 2019, the gross assets of Premium Cigars were £1,287 million and net assets were £1,111 million. An update on asset values and expected adjustments to foreign exchange reserves resulting from the transaction will be provided on publication of Imperial’s interim results for the 6 months to 31 March 2020.
Imperial is being advised by AZ Capital on the agreed sales of Premium Cigar USA and Premium Cigar RoW.
*Earnings dilution calculation based on FY19 reported results & assumes 100% of proceeds are used to reduce debt, reducing the need for further financing in the short term, based on an implied equivalent coupon of 2.75% in the current volatile market conditions.
Background on Premium Cigars: The business comprises assets purchased as part of Imperial’s acquisition of Altadis in 2008, and the disposal consists of two transaction perimeters:
Premium Cigar US
Tabacalera USA, which is responsible for the business’ premium cigar operations in the US, the world’s largest premium cigar market, including: The assets and other property of Altadis USA, which is responsible for the distribution of premium cigars in the US; Leading online retail platforms, including JR Cigar, cigar.com and Serious Cigars; A specialist brick-and-mortar retailer, Casa de Montecristo, with 28 stores across the USA.
Premium Cigar RoW: Cuban premium cigar interests, including: A 50 per cent stake in Habanos S.A., which exports hand-made cigars from Cuba and is responsible for international marketing activities. Habanos products include world-renowned Cuban brands such as Cohiba, Montecristo and Romeo y Julieta; A 50 per cent stake in Altabana S.L., which is responsible for the distribution of Cuban cigars worldwide through its network of over 20 subsidiary distributors; A 50 per cent stake in Internacional Cubana de Tabaco, S.A., which is responsible for the manufacturing of Cuban premium machine-made cigars; A 50 per cent stake in Promotora de Cigarros, S.L., which manages the distribution of the Cuban premium machine-made cigar portfolio worldwide; Other sales of premium cigar products through Tabacalera SA including:
o Exclusive distribution of Cuban handmade cigars in Spain; Non-Cuban premium handmade cigar sales operations outside the US, including Vegafina, the bestselling non-Cuban brand outside the US.
Premium cigar manufacturing facilities in Honduras and Dominican Republic. The Dominican Republic factory manufactures both mass market cigars and premium cigars and will be physically separated to enable the sale of the premium cigar facilities. All employees, other than those involved with mass market cigars in the Dominican Republic factory, will transfer to the new owner Allied Cigar Corporation, S.L.
