Investing.com -- Japan Tobacco (OTC:JAPAF), along with British American Tobacco (LON:BATS) and PMI’s Canadia business, have agreed to pay a total of 32.5 billion Canadian dollars, or $22.6 billion USD, to settle ongoing litigation concerning the health risks associated with tobacco products in Canada. This settlement will bring an end to the uncertainty that has been looming over the companies’ global operations for decades.
The Canadian units of these tobacco titans filed documents with an Ontario court on February 27, expressing their joint commitment to settling all pending tobacco-related claims in the country. This move came after a series of legal proceedings, beginning in March 2019 when the Quebec Court of Appeal dismissed an appeal of two class-action lawsuits against three Canadian tobacco companies, including JTI-Macdonald Corp., a subsidiary of Japan Tobacco.
Following the dismissal, JTI-Macdonald Corp. applied for protection under the Companies’ Creditors Arrangement Act (CCAA), which was granted. This allowed the company to halt all legal proceedings and enforcement of judgments it was involved in within Canada, enabling it to preserve its assets and continue its operations. Its co-defendants, Imperial Tobacco (LON:IMB) Canada and Rothmans, Benson & Hedges, also sought and received CCAA protection in March 2019.
Since then, the companies have been partaking in a court-ordered mediation process with representatives of multiple claimants, including the Quebec class action plaintiffs and all provincial and territorial governments, with the aim of reaching a final resolution to all pending litigation.
In October 2024, the court-appointed mediator and the CCAA monitors proposed a plan under which the three companies would pay a total of 32.5 billion Canadian dollars to settle the litigation. After a court hearing in January 2025, the companies reached an agreement on the allocation of payments among them, which was a significant unresolved issue. The proposed amendments were filed with the Ontario Superior Court on February 27.
As a result of the settlement, Japan Tobacco plans to record a provision for litigation losses related to the payment of the settlement amount as an operating expense in fiscal year 2024. The amount of the provision related to the Canadian settlement is estimated to be under 400 billion yen. The company announced it will provide updated financials as soon as the final amount of the provision is determined.
Despite the financial impact of the settlement, Japan Tobacco has stated that there will be no changes to the planned dividend per share for the fiscal year 2024 of 194 yen, as announced on February 13, 2025. The proposed settlement is still subject to court approval.
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