BUZZ-Scandinavian Tobacco Group: the Cohiba question

** The thawing of relations between Cuba and the US may be negative for Scandinavian Tobacco Group (STG), says Old Mutual Global Investors’ Ian Ormiston who avoided buying shares in the company at its recent IPO

** STG owns US-based General Cigar, which is locked in a long-running legal battle with a state-owned Cuban cigar company over the Cohiba trademark that both use for their products

** Due to a decades-old US trade embargo with Cuba, Cubatabaco cannot sell its Cohiba cigars in the US, but it does sell them in Cuba and elsewhere. General Cigar sells Dominican Republic-produced Cohiba cigars in the US

** Legal dispute over whether Cuban company has the right to challenge General Cigar’s trademarks in the US despite embargo

** US Supreme Court handed a victory to Cubatabaco this yr by declining to intervene in their dispute

** Ormiston wary that as Cuba/US relations thaw, Cubans might have a claim on their brand; also flags risk of US pouring investment into Cuba and ensuing expansion in high-quality Cuban cigars, making world market slightly more competitive

** Unclear whether embargo will be lifted; Cuba and US reestablished diplomatic relations a year ago after decades of hostility

** Habanos, distribution arm of Cubatabaco, expects to immediately gain 25-30% of US premium cigar market if US lifts embargo and up to 70% of market within a few years