The Philippine unit of Philip Morris International and unlisted Fortune Tobacco Corp will combine their core businesses in an interesting new company which is going to control 90% of the national cigarette market. Philip Morris and Fortune Tobacco made an agreement to form a new company called PMFTC, affirmed Chris Nelson, president of Philip Morris Philippines.They said that they won’t say what the financial details are. Nelson said that they both were the initiators of the talks. The new company will command a dominant position in the local tobacco market, with Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco, that owned by one of the country’s richest men, Lucio Tan, having a combined share of about 90%.
Philip Morris—which is the manufacture of Marlboro cigarettes and is the world’s biggest non-state-owned tobacco firm, with over $2.4 billion earnings in Asia last year—are considering the Philippines its 12th-biggest market. Through the new firm, it gains wider access to the local cigarette market, including the profitable medium- to low-priced segments.
A joint statement said Fortune Tobacco and Philip Morris “each contributed selected assets and liabilities into the new company, with each party holding an equal economic interest.” Philip Morris will retain its export business, shipping cigarettes mostly to Thailand. It declined to give the value of the export business.
Fortune Tobacco will maintain its interest in the distribution of the Winston brand of Japan Tobacco Inc. It also said the new firm would not be affected by pending tax and ownership disputes with local courts involving Fortune.
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