Philip Morris Regains UK Marlboro Control
LONDON (Reuters) - A British court on Wednesday dismissed British American Tobacco Plc's appeal over a UK licensing deal for Marlboro cigarettes, returning control of the brand in the UK to its owners Philip Morris Cos Inc.
The dispute between the world's two largest cigarette groups centered on a licensing deal between U.S.-based Philip Morris and Rothmans -- now owned by BAT -- for the UK distribution of the world's top selling cigarette brand, Marlboro.
Three Appeal Court judges agreed with Philip Morris that BAT's takeover of Rothmans in June 1999 constituted a change of ownership, triggering a get-out clause from the lucrative license.
``I agree that what was done by Rothmans amounted to circumstances entitling Philip Morris to terminate the agreement,'' said Lord Justice Schiemann, dismissing BAT's appeal.
Last July, Philip Morris was granted permission to end the Marlboro license after the London High Court ruled the merger did represent a change of control.
A BAT spokeswoman said the group would not appeal against the ruling to the House of Lords, and the case was now settled.
Analysts said the Appeal Court decision was very much as expected, and after an initial fall BAT shares recovered to gain three pence to 537p by 1400 GMT.
PHILIP MORRIS LOOKS FOR VENTURE EXIT
The two arch-rivals have argued over the case since BAT inherited Rothmans' 65 percent stake in a business that distributes Marlboro in the UK.
The venture, Rothmans (UK) Ltd, was set up in 1989 to run for 25 years, and has the rights under a license agreement to sell and distribute cigarette brands of both partners, which include the very profitable Marlboro brand.
At stake is a UK business estimated to make around 120 million pounds ($169 million) a year in operating profits.
Philip Morris is keen to withdraw as it only earns 35 percent of profits from a business where Marlboro products provide most of the sales.
The licensing deal will end in September and then Philip Morris can either distribute in the UK itself, renegotiate fresh terms with BAT or link up with Britain's two dominant domestic cigarette players Imperial Tobacco Group Plc Gallaher Group Plc .
Analysts say it would be expensive for Philip Morris to set up distribution itself in a highly regulated UK market, while Gallaher with its Silk Cut brand would compete with Philip Morris' leading UK brand Marlboro Lights.
Philip Morris has a 6.8 percent share of the UK cigarette market compared with an average 37 percent share across continental Europe. The Marlboro brand has a UK market share of 1.5 percent and Marlboro Lights 4.1 percent.