Key points:
1. Canadian court approves three major tobacco companies to pay C$32 billion ($22.6 billion) in compensation to settle long-standing litigation.
2. This settlement plan will take effect in 2025 and will not impact the financial expectations of British American Tobacco.
3. Philip Morris International subsidiary has set aside C$750 million ($500 million) to maintain the operations of its combustible business.
According to a report by Reuters on March 8th, British American Tobacco (BAT) and Philip Morris International (PMI) issued statements confirming that a Canadian court has approved a plan to settle a long-standing tobacco lawsuit in Canada. The subsidiaries of the three major tobacco companies will pay a total of C$32.5 billion ($22.6 billion) in compensation.
This settlement resolves litigation involving PMI, BAT, and Japan Tobacco (JT). The lawsuit accused the Canadian subsidiaries of these three tobacco giants of knowing since the 1950s that their products could cause cancer and other diseases, but failing to adequately warn consumers.
In 2019, a Quebec court upheld its 2015 ruling ordering tobacco companies to pay around C$15 billion ($10.4 billion) in damages to about 100,000 smokers and former smokers who had filed a class-action lawsuit.
This ruling forced the Canadian subsidiaries of three cigarette manufacturers, Imperial Tobacco Canada, JTI-Macdonald, and Rothmans, Benson & Hedges, to file for bankruptcy protection in 2019.
PMI announced on Friday that Rothmans, Benson & Hedges are allowed to retain C$750 million ($500 million) from prepayments related to settlements.
"The settlement plan also includes a series of operating agreements that will manage RBH's combustible business until the settlement amount is fully paid."
PMI also announced that opposition from its affiliates and other parties to the settlement plan has been resolved.
The settlement plan proposed by the court-appointed mediator will be implemented and come into effect in 2025.
BAT stated that this settlement will not impact its financial expectations for 2025.
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