A Danville, Va., tobacco export company and R.J. Reynolds Tobacco Co. are disputing how to value a Brazilian tobacco company owned by Reynolds.
Reynolds filed an action this week in Forsyth County Superior Court to enjoin the release of an audit of the Brazilian business to Dibrell Brothers, the Danville company that earlier this year bought the leaf and cigarette manufacturing operations in that South American country from Reynolds.Dibrell said the purchase agreement called for it to pay $9 million initially and up to another $41 million for the tangible net worth, with the figure to be determined by the Ernst & Young accounting firm in a final audit of the closing balance sheet. Reynolds was to reimburse Dibrell for any difference between its valuation and that of Ernst & Young if the latter's was lower.
In its Superior Court suit, Reynolds contends the Ernst & Young valuation of assets does not use the accounting method agreed upon and hence would result in a financial windfall for Dibrell. It also charged that Ernst & Young acted improperly and unfairly in valuing the property with the encouragement of Dibrell.
Dibrell President Claude B. Owen Jr. said the Reynolds suit ``is totally without merit ... We have successfully done business with RJR for many years on the basis of mutual confidence and a handshake. It is incredible that they have taken this extraordinary legal action.'
In a public statement responding to charges in the Reynolds suit, Owen said Ernst & Young apparently found the net worth to be ``substantially less' than Reynolds had shown. He said the Reynolds court action indicated a $35 million difference.
Owen said the assets were affected by actions taken last March by the Brazilian government to curb inflation. These include freezing prices on domestic products and changing the exchange rate for Brazilian currency.