Richemont May Snuff British American Tobacco

Source from:  forbes.com Parmy Olson, 11.19.07 11/20/2007

Even in the world of priceless diamonds and expensive luxury goods, cutting a few corners when it comes to paying tax can be a helpful exercise. It is for that reason, and not--as far as we know--for any distaste for Dunhill cigarettes, that Swiss luxury goods conglomerate Richemont is thinking of ditching its large investment in British American Tobacco. Richemont, the maker of Cartier watches and Mont Blanc pens, said Monday that it wanted to reorganize itself before a new EU rule banning tax breaks for companies based in Luxembourg, took effect in 2010. The world's second largest luxury goods firm behind France's LVMH Moet Hennessy Louis Vuitton (other-otc: LVMHF - news - people ), owns 19.3% of British American Tobacco (amex: bti - news - people ) through holding company Richemond SA, based in Luxembourg, a popular tax haven. "The plans for this possible restructuring remain subject to further review," Richemont said. "There can be no certainty that any such review would lead to a proposal being announced." Investors in Richemont still got excited, sending shares in the company up 1.1%, to close at 73.80 Swiss francs ($66.13), after rising as high as 8% earlier in the day. British American Tobacco closed down 2.5%, at £17.73 ($36.34), on Monday in London. Richemont could perhaps do with the cash anyway. The relentless rise of the euro against the yen and the dollar--Richemont gets about one third of its revenue from Japan and the U.S.--have not been helping growth. The step to carve of the stake in BAT could also help the luxury goods sector, which is traditionally seen as undervalued, a ZKB trader said. Richemont was founded nearly 20 years ago by South African tycoon Johann Rupert, who is worth $4.3 billion. Enditem