iNVEZZ.com, Friday, December 20: The Supreme Court of Canada has refused to hear an appeal in a case involving British American Tobacco plc (LON:BATS) and five other tobacco majors seeking to be removed as defendants in Ontario's $50 billion lawsuit over health-related costs against the tobacco industry.
BAT’s share price was 0.06 percent down to 3,192p at 9:04 UTC today, valuing the world's second-largest cigarette maker at £60.24 billion.
The Ontario government is seeking to recoup billions of dollars in healthcare costs attributed to tobacco-related illness. British American Tobacco PLC, British American Tobacco (Investment) Ltd., B.A.T. Industries PLC, Carreras Rothmans Ltd., R.J. Reynolds Tobacco Co. and R.J. Reynolds Tobacco International Inc. argued they were foreign entities and the Ontario courts didn’t have jurisdiction to determine claims against them.
The lawsuit stems from a 2009 law that gave the Canadian province a statutory right to sue cigarette makers over tobacco-related health costs. The foreign companies were attempting to overturn a May 30, 2013, judgment of the Ontario Court of Appeal that had dismissed their motion to be removed from the lawsuit, in which the main issue at stake is whether the tobacco industry will be held liable to pay damages for health care costs relating to smoking.
The Supreme Court ruling, which was issued yesterday, is the latest in a series of refusals by Canadian courts to allow tobacco companies to get out of lawsuits over healthcare costs recovery. Courts in British Columbia, Saskatchewan, Quebec and New Brunswick have also rejected attempts by foreign companies to be removed as defendants. In the British Columbia and New Brunswick cases, the Supreme Court of Canada also refused to hear appeals sought by the tobacco industry.
The ruling by Canada’s top court comes just a day after European Union diplomats approved new anti-tobacco legislation tightening restrictions on how products are made and sold (Imperial Tobacco share price: EU law could threaten e-cigarette market growth). The new rules aim to make smoking less attractive in a bid to reduce the estimated 700,000 tobacco-related deaths in Europe every year.
In October, British American Tobacco, which sells its brands in some 180 markets, reported a 3.5 percent year-on-year rise in group revenues in the first nine months of 2013, at constant exchange rates, even though volumes declined 3.2 percent to 501 billion cigarettes (BAT share price: Revenues rise but volumes shrink). Nicandro Durante, Chief Executive Officer, commented in the interim management statement: “We remain on track for a year of solid earnings growth.”
City analysts expect BAT to increase its dividend payout from last year’s 134.9p to 142.5p and 151.2p in 2013 and 2014,respectively - payments that would create yields of 4.6 percent and 4.8 percent.
Analysts on British American Tobacco
Equity research analysts at Panmure Gordon yesterday downgraded shares in BAT to a “hold” rating in a note issued to investors, Analyst Ratings News reported. The analysts also lowered their price target on the stock to 3,300p from the previous price objective of 3,800p.
Analysts at Nomura have a “buy” rating on BAT but on Wednesday cut their price target to 3,720p from 3,840p. On Tuesday, analysts at UBS cut their price target on BAT’s stock to 3,715p from 3,850p.
As of 10:00 UTC buy BAT shares at 3,203p
As of 10:00 UTC sell BAT shares at 3,202p
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