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Non-Tech : Philip Morris - A Stock For Wealth Or Poverty (MO) -- Ignore unavailable to you. Want to Upgrade?

To: B.K.Myers who wrote (6401)	3/14/2005 12:06:03 PM
From: Jim Oravetz	Read Replies (1) \| Respond to of 6439

Philip Morris Offers to Buy Indonesian Cigarette Maker By EDHI PRANASIDHI and SAI MAN DOW JONES NEWSWIRES March 14, 2005 7:22 a.m. JAKARTA, Indonesia – Tobacco company Philip Morris International Monday offered to acquire Indonesian cigarette maker PT Hanjaya Mandala Sampoerna for $5.13 billion in total, after announcing that it has already agreed to buy 40% of the company from major shareholders. Through the deal, Philip Morris International, a unit of U.S.-listed Altria Group Inc., is seeking growth in a developing market where cigarette smoking is on the rise, which it hopes will offset shrinking sales in increasingly health-conscious markets such as Europe and North America. Philip Morris International said Monday it has agreed to pay $1.98 billion for a 40% stake in Sampoerna, the second-biggest listed cigarette company in Indonesia after PT Gudang Garam. For this stake, Philip Morris said it will pay 10,600 rupiah ($1.13) a share for the 1.753 billion shares of Sampoerna from several shareholders, including Dubuis Holdings Ltd., which is controlled by Putera Sampoerna, a member of the cigarette maker's founding Sampoerna family. The 20% premium over Sampoerna's closing price of 8,850 rupiah last Thursday will be extended to shareholders of the remaining Sampoerna shares Philip Morris doesn't own. Markets in Indonesia were closed for a holiday on Friday. The offer values Sampoerna at 48 trillion rupiah, including net debt of about 1.5 trillion rupiah, according to Philip Morris International. "The price reflects Sampoerna's quality and strong business outlook," said David Davies, Philip Morris International's senior vice president for corporate affairs on Monday. The offer will be debt-financed through bank loans, the U.S. company said. The deal highlights Philip Morris International's efforts to expand its presence in less-developed markets, even as health concerns have crimped cigarettes sales in mature markets like Europe and North America. In contrast, smoking remains a popular pastime for the majority of Indonesia's male population. Increasing numbers of women in the country are also taking up the habit. "Our investment in Sampoerna is a great opportunity to significantly expand our business in the world's fifth-largest and growing cigarette market," Andre Calantzopoulos, Philip Morris International's president and chief executive, said in a statement Monday. "Today's announcement reflects our confidence in the economic future of Indonesia and its tobacco industry," he said. The U.S. cigarette maker said the public tender offer would to be completed within 90 days, and would be subject to Indonesian regulatory requirements. Laksono Widodo, the head of research in Jakarta for Macquarie Securities, said the deal reflects growing foreign investor confidence in Indonesia's economy, especially the consumer sector. The deal could also have a broader impact on the stock market, he said, with investors viewing this as a signal for a major push by foreign investors into Indonesia. Sampoerna shares surged 18% to close at 10,450 rupiah Monday on the news. The Jakarta Stock Exchange Composite index ended up 1.4% at 1123.482. Philip Morris International said Sampoerna sold an estimated 41 billion cigarettes in 2004, generating net revenue of 9 trillion rupiah. Its operating income is estimated at around 3.1 trillion rupiah in 2004, up 20% from a year earlier, the U.S. company said. Sampoerna, which produces clove cigarettes called kretek, enjoyed a 19.4% share of the local market in 2004. Kretek sales represent 92% of the total Indonesian cigarette market of around 200 billion sticks annually. Mr. Davies said with Philip Morris International's financial muscle behind Sampoerna, the Indonesian cigarette maker will be in a better position to face rising competition among cigarette makers in the country. "We expect the company's revenue to continue to grow after we join in," he added.