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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Xxxxxx Xxxx/Xxxx Xxxxxxxx/Xxxx Xxxxxxxx
Xxxx Xxxxxxxxx & Co
212/687-8080
XXXXXX XXXXXX TO PURCHASE THREE XXXXXXX BRANDS FOR $300 MILLION
XXXXXXX WILL JOIN ATTORNEYS GENERAL TOBACCO SETTLEMENT AGREEMENT
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MIAMI, FL, NOVEMBER 20, 1998 -- Brooke Group Ltd. (NYSE: BGL) today
announced that it has signed a definitive agreement with Xxxxxx Xxxxxx Inc.
(NYSE: MO) for Xxxxxx Xxxxxx Inc. to purchase options to buy three of its
subsidiary Xxxxxxx Group's cigarette brands, L&M, Chesterfield and Lark, for
$300 million in cash. An initial payment of $150 million is expected to be made
within 10 days as an option fee, with the balance to be paid upon exercise of
the options by Xxxxxx Xxxxxx.
Although the transfer of the brands is subject to antitrust clearance,
the initial $150 million cash payment by Xxxxxx Xxxxxx to the Xxxxxxx subsidiary
is not conditioned on receiving such clearance. Xxxxxx will use the initial
payment to redeem the approximately $145 million of Xxxxxxx senior secured notes
outstanding.
The Company also announced today that Xxxxxx and Xxxxxxx have agreed to
join the Master Settlement Agreement ("MSA") recently reached between the
Attorneys General and the tobacco industry. Under terms of the MSA, Xxxxxx and
Xxxxxxx will have no payment obligation to the signing states as long as Xxxxxxx
does not exceed a national market share of 1.67% (approximately 8 billion
units/400 million packs). In the event that Xxxxxxx exceeds 1.67% market share,
Xxxxxxx will pay for the portion above 1.67% according to the formula set out in
the MSA.
L&M, Chesterfield and Lark are three of Xxxxxxx'x four premium
cigarette brands but account for only 14% of Xxxxxxx'x annual sales volume.
Xxxxxx Xxxxxx already owns the international rights to these brands, which it
purchased from Xxxxxxx approximately 20 years ago. Xxxxxxx will continue to own
a number of discount and private label cigarette brands, as well as its
remaining premium cigarette brand, Eve.
Xxxxxxx X. XxXxx, chairman and chief executive officer of Brooke Group,
stated, "We're extremely pleased that we were able to achieve an attractive
valuation for these brands that will benefit Xxxxxx shareholders. Xxxxxxx'x
predominant focus will continue to be on its discount and private label
cigarette business." XxXxx added, "We're also pleased to be joining the
agreement with the Attorneys General and the rest of the tobacco industry. By
doing so, Xxxxxxx xxxxxxx with states with which we have been unable to reach
agreements to date. Xxxxxxx has now largely accomplished the goals we set when
we began settling these lawsuits in March 1996, to protect the
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Company from liability while changing the way the tobacco industry does
business. Going forward, we are hopeful that this agreement leads to a
meaningful reduction in underage smoking."
By joining the MSA, Xxxxxx and Xxxxxxx have agreed to abide by all
advertising, marketing and other restrictions covered by the MSA.
Prior to joining the MSA, Xxxxxx and Xxxxxxx had reached their own
settlement agreements with Attorneys General representing 41 states, accounting
for more than 85% of the nation's Medicaid claims. The terms of Xxxxxxx'x prior
settlement agreements will no longer apply, except with respect to Florida,
Minnesota, Mississippi and Texas, the four states that have separate settlement
agreements with Xxxxxxx and the rest of the tobacco industry and are not
signatories of the MSA.
Brooke Group is a holding company which owns Xxxxxxx Group Inc. and
controlling interests in Xxxxxxx-Xxxxx Ltd. and New Valley Corporation.
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