Rothmans and Dunhill are controlled by Richemont, a company based in Switzerland and run by the Rupert family of South Africa, which will pocket nearly pounds 300m.
The reconstruction will involve merging Rothmans, Dunhill and Cartier, also ultimately owned by Richemont, into two companies separately concentrating on tobacco products and luxury goods.
City analysts were stretched yesterday to draw any meaningful conclusions from the complex plans. Nick Edwards at Yamaichi Securities said: 'Large institutions are undecided which way to play this one. There are problems with tobacco wars in the US, and luxury goods companies are having to cut prices to shift stock.' But he added: 'If you are a shareholder you have to stick with them. It would be unwise to sell. We have to wait and see what the big guns do.'
Rothmans is being retained as the name for the tobacco group. It will house the original Rothmans tobacco businesses and certain trademarks owned by Dunhill and Richemont.
Luxury goods operations are being put into a company called Vendome, named after the Place Vendome in Paris where the Cartier business was founded. Other luxury goods brand names in Vendome will include Montblanc pens and Chloe and Karl Lagerfeld fashions.
Lord Swaythling will remain chairman of Rothmans and his board colleague Joe Kanoui will become chairman and chief executive of Vendome.
The aim is to have the two new companies listed on the stock market by the end of October. Both are likely to become constituents of the FT-SE 100 share index, with Rothmans currently valued at more than pounds 4.2bn and Dunhill at pounds 650m.
Merger plans were first outlined late on Tuesday and Rothmans and Dunhill shares climbed sharply before dealings were suspended first thing on Wednesday. However, when dealings resumed yesterday Rothmans fell 28p to 692p and Dunhill 22p to 383p.
Although the two new companies will be quoted separately on the London market, they will remain under the majority control of Richemont, which will own 61 per cent of Rothmans and 70 per cent of Vendome.
For every 1,000 Rothmans 'B' shares held, investors will receive 1,000 Rothmans units, 500 in Vendome and pounds 757 cash. Holders of 1,000 Dunhill ordinary shares will get 133 Rothmans units, 749 in Vendome and pounds 443 in cash.
Rothmans yesterday reported pre-tax profits of pounds 614m (pounds 565m) for the year to 31 March, with the dividend up 1p at 11.5p.
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