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British American Tobacco ordered to pay £5.5bn to smokers

Court rules that three tobacco makers should pay a total of Can$15.6bn – the largest award in Canadian history

British American Tobacco has been ordered to pay Can$10.5bn (£5.5bn) to nearly 1m smokers who claimed they were never warned about the health risks.

A Canadian court found Imperial Tobacco Canada, which is owned by London-based BAT, Rothmans Benson & Hedges and JTI-MacDonald liable for moral and punitive damages.

The total award of Can$15.6bn is the largest in Canadian history. All three companies said they would appeal.

The two class action lawsuits behind the award were originally filed in 1998, but only went to trial recently. They represent nearly 1m smokers who were unable to quit or who suffer from throat or lung cancer, or emphysema.

The plaintiffs argued that the companies neglected to properly warn their customers about the dangers of smoking, and failed in their general duty “not to cause injury to another person”, according to the Quebec Superior Court.

They also accused the firms of unscrupulous marketing and of destroying documents relevant to the case.

The companies said the court’s decision is not supported by the evidence presented at trial.

“Today’s judgment ignores the reality that both adult consumers and governments have known about the risks associated with smoking for decades, and seeks to relieve adult consumers of any responsibility for their actions,” said Imperial Tobacco Canada.

Meanwhile, BAT, which also makes Lucky Strike and Pall Mall cigarettes, is spending €550m (£394m) on a Croatian tobacco company as it seeks to boost its business in central Europe.

TDR is a cigarette maker with operations in Croatia, Bosnia and Serbia.

The world’s second biggest tobacco company is buying the business from Adris Grupa, a conglomerate whose interests range from tourism to insurance.

BAT plans to merge TDR with its own operations in the region and pledged to keep its factory in Kanfanar open for at least five years following the deal.

The FTSE 100 company’s offer values TDR on 12.5 times €44m in pre-tax earnings generated last year.

“This is an exciting acquisition for BAT, which will provide immediate scale in three core markets of Croatia, Bosnia and Serbia and establishes a sustainable platform to grow our business in central Europe,” said BAT boss Nicandro Durante.

BAT and its rivals are attempting to offset waning demand for tobacco products in the West by tapping growth elsewhere.

At the same time as expanding in central Europe, BAT is seeking to boost its operations in Brazil by buying the 24.7pc of cigarette manufacturer Souza Cruz that it does not already own.

Anti-smoking legislation, the growing popularity of e-cigarettes and higher taxes have all hurt cigarette sales and the profits of the companies that make them.

In April, BAT, which has lifted prices to counteract falling volumes, posted first-quarter revenue growth that was much weaker than expected.

Excluding the impact of foreign exchange movements, BAT sales edged up 1.7pc in the three months to the end of March – missing forecasts of 3.5pc – and volumes slid 3.6pc.

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