Marlboro maker Philip Morris yesterday said it is offering US$5.2 billion for one of heavy-smoking Indonesia's largest cigarette firms to expand its share of one of the world's biggest markets.
The US firm agreed to acquire a 40 percent stake in Sampoerna for 10,600 rupiah (US$1.13) a share -- 20 percent higher than the closing price of 8,850 last Thursday -- and said it wanted to buy the remainder for the same amount.
Sampoerna's shares rose sharply on the offer, which Philip Morris International -- the operating arm of the Altria Group -- hopes to complete within 90 days, paying cash for the stock.
"This is an excellent development for our shareholders and employees," said Putera Sampoerna, the Indonesian firm's president.
Traders were caught off guard by the announcement, which comes just months after a Sampoerna subsidiary struck a deal to distribute Marlboro and other leading Philip Morris brands across Indonesia.
"It is surprising because we did not think of this scenario before," said Prayoga Triyono, an analyst with brokerage firm PT Henan Putirai. "I don't think Putera Sampoerna is in need of money."
In what will be one of the largest tobacco industry acquisitions in recent years, Philip Morris will be able to tap into an expanding market, offsetting losses due to anti-smoking laws and costly health-related litigation elsewhere.
About 70 percent of Indo-nesia's 213 million people smoke and 57,000 deaths a year are blamed on tobacco but there is little legislation to protect users.
Indonesia is the world's fifth largest cigarette market, after China, the US, Russia and Japan.
"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, resident of Philip Morris International, said in a statement.
Sampoerna, which makes the notoriously strong-smelling and tasting kretek or clove cigarettes, produced sales of nearly US$1 billion last year, making it Indonesia's third-biggest tobacco firm with 20 percent of the market.
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