US/INDONESIA. Philip Morris International (PMI), the international tobacco operating company of Altria Group, yesterday announced that it had entered into an agreement to acquire a 40% stake in Indonesian kretek* cigarette manufacturer PT HM Sampoerna Tbk (Sampoerna) from a number of Sampoerna’s principal shareholders.
It will proceed to make a public tender offer for all the remaining shares at a price per share of Rp10,600 (US$1.13), a premium of +20% over the price of Rp8,850 (US$0.95) on Thursday 10 March.
Assuming that all shares are tendered, the transaction values Sampoerna at approximately Rp48 trillion (US$5.2 billion) including net debt of approximately Rp1.5 trillion (US$160 million). PMI said it will pay cash for all shares tendered and expects the transaction, when completed, to be modestly accretive in 2005 to the diluted earnings per share of Altria Group.
Sampoerna is Indonesia’s third-largest tobacco company, with estimated domestic tobacco volume of 41 billion units in 2004, generating net revenues of approximately Rp9.0 trillion (US$1.0 billion). Its operating income was estimated at approximately Rp3.1 trillion (US$360 million) in 2004, up +19.5% against 2003. It has a strong presence in the Asian duty free market with brands such as ST Dupont and Sampoerna.
Sampoerna has strong kretek cigarette brands, including Dji Sam Soe and A Mild, and held a 19.4% share of the market in 2004. Its shares are listed in Indonesia on the Jakarta and Surabaya exchanges.
“Our investment in Sampoerna is a great opportunity to significantly expand our business in the world’s fifth-largest, and growing cigarette market,” said PMI President and CEO Andre Calantzopoulos. “Today’s announcement reflects our confidence in the economic future of Indonesia and its tobacco industry, and positions us for profitable future growth by partnering with a well-managed and successful company that has an outstanding distribution and manufacturing infrastructure.”
“This is an excellent development for our shareholders and employees,” said Sampoerna President Commissioner Putera Sampoerna. “PMI is well known as a successful and responsible manufacturer and marketer of quality tobacco products.”
“We look forward to working with the employees of Sampoerna and are especially pleased that Putera Sampoerna has agreed to serve as special advisor to the board through the integration period and beyond,” said Matteo Pellegrini, President for the Asia Pacific region of PMI.
“The action we are taking today reflects our decision to enter the large and profitable kretek cigarette segment in Indonesia. We intend to further invest in Sampoerna’s infrastructure and will continue to build the brand equity of its strong and well-established brands. We have the highest regard for Sampoerna, its employees and its heritage.”
PMI, headquartered in Lausanne, Switzerland, currently holds a 14.5% share of the international cigarette market. Its brands, led by Marlboro and L&M, are manufactured in more than 60 factories around the world and sold in over 160 countries.
* Kretek cigarettes are made with tobacco and cloves. They represent 92% of the total Indonesian cigarette market, which is estimated at more than 200 billion units annually.
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