This week's approval to create two classes of Bacardi stock could pave the way for flotation, writes Nils Pratley

The public face of Bacardi is the mischievous dancing cat in the ads. The private face is a secretive, family-controlled empire that has been accused of plotting to undermine the Castro regime in Cuba and of fuelling a transatlantic trade war. On Wednesday, the divided family approved a motion that could lift the lid on Bacardi: for the first time in its 141-year history, outsiders may be allowed to buy shares in the world's biggest rum producer.

In Bacardi corporate style, journalists were banned from its shareholder meeting in the tax haven of Bermuda, it declined to answer questions and issued a statement of just two paragraphs. The historic phrase was "the creation, but not the issuance, of two classes of Bacardi Limited common stock".

Issuance will require a separate vote, but approval seems a formality after this week's two-thirds majority. It could pave the way for a flotation probably on the New York Stock Exchange, where Bacardi would be worth about $5 billion (€4.4 billion). It is the world's fourth-largest spirits firm, and its other brands include Dewar's whisky, Martini vermouth and Bombay Sapphire gin.

Yet this is not 21st century corporate governance. The two classes of share will be one for Bacardi family members and another for the rest. The former are likely to carry 10 times the votes of the latter, a measure designed to ensure the 600 or so family members never lose ultimate control.

For the last decade those 600 individuals have owned a lucrative ticket. Last year the firm made operating profits of $734 million on sales of $2.7 billion and generated post-tax earnings of $444 million, helped by a $155 million tax refund in Mexico. Company rules dictate that Bacardi must pay out more than half its post-tax profits to shareholders in dividends.

The impetus for change, albeit modest, is chief executive Ruben Rodriguez, the first non-family member to lead the firm. He told shareholders that Bacardi needed financial flexibility to keep up with Britain's Diageo and Allied Domecq in a consolidating spirits industry. This week's vote is a personal triumph for him: when his predecessor called for a float in 1999 he was effectively forced out.

Mr Rodriguez's chief opponent was Karen T Bacardi-Fallen, a Boston lawyer whose great-great-grandfather, Don Facundo Bacardi y Maso, was a founder of the business in Cuba. She described the plan as "the newest reincarnation of already defeated proposals put forth by this week's collection of investment bankers and New York lawyers". It wasn't enough to scare the rest of the clan.

Secrecy seems to have been in the firm's blood since it fled Cuba after Fidel Castro nationalised its assets there in 1959. Some of those secrets were exposed by Cuban journalist Hernando Calvo Ospina in a book last year titled Bacardi: The Hidden War. Mr Ospina alleged that the firm's former head, the late Jose Pepin Bosch, hired an aircraft to bomb Cuba's oil refineries to create a blackout and encourage subversion. The plan was abandoned when a picture of the aircraft was published in the New York Times.

In recent years, Bacardi family members have contributed to campaigns that led to the 1996 Helms-Burton legislation, which strengthened US trade embargoes against Cuba, and the firm has been at the centre of a complicated trade dispute over the rights to Havana Club rum, produced in Cuba by French group Pernod-Ricard through a joint venture.

The product cannot be sold in the US, but in 1995 Bacardi registered the Havana Club name in the US, saying it had bought the rights from the original pre-revolution Cuban owner, and began producing its own rum under the name. Pernod-Ricard's inevitable appeal was thrown out by US courts but provoked a protest from the EU to the WTO.

The latest round of this legal battle centres on Florida governor Jeb Bush, brother of the president. Bacardi, with a US base in Miami, has given $200,000 to Florida Republicans since 1998 and Pernod-Ricard has submitted emails that purport to show the governor put pressure on local trademark officials to back Bacardi in the dispute.

If this week's vote leads to a stock market flotation for Bacardi, it should ensure that it is not the cat in the ads or the bat in the logo that dominates the prospectus; it will be the section headed "legal disputes". - (Guardian Service)