PMPMI, Fortune team up to form tobacco giant

MANILA, Philippines - The local unit of Philip Morris International and Lucio Tan-owned Fortune Tobacco Corp. have agreed to join forces to form a new company which will virtually monopolize the local cigarette market, top officials of the two companies said yesterday.

“Philip Morris and Fortune Tobacco concluded an agreement to form a new company called PMFTC (Philip Morris Fortune Tobacco Corp. Inc.),” Chris Nelson, president of Philip Morris Philippines Manufacturing Inc. (PMPMI) told reporters.

He stressed that the new company will be a “partnership of equals” as both will have equal economic interest.

“It’s 50-50, it’s an equal marriage. We are not going to divulge the financial details,” Nelson said.

The new company will command a dominant position in the local tobacco market, with PMPMI and Fortune Tobacco having a combined share of about 90 percent.

Tan, one of the country’s richest businessmen, will sit as chairman of the new company while Nelson will oversee operations as its president.

PMPMI, which sells Marlboro cigarettes and is the world’s largest non-state-owned tobacco firm, considers 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.

Meanwhile, Fortune Tobacco will keep its interest in the distribution of the Winston brand of Japan Tobacco Inc., the statement said. It also said the new firm would not be affected by pending tax and ownership disputes with local courts involving Fortune.

Nelson said Fortune Tobacco brands such as Hope, Champion, More and Camel will still be manufactured in the Marikina plant while PMPMI products like Marlboro will still be made in Batangas.

Philip Morris has dominated the high-end cigarette market in the Philippines for years while Fortune Tobacco is the top player in the medium to low-priced cigarette segment, with a 60 percent share of the entire industry.

“By uniting our business operations with a well managed and successful company that has an outstanding distribution and manufacturing infrastructure like Fortune Tobacco, we are laying the foundation for the long-term success of PMFTC Inc.,” Nelson said.

“While Philip Morris currently competes mainly in the premium price segment, Fortune Tobacco’s strength is in the value and medium priced segments. Thus, PMFTC Inc. will have a representation in all segments of the Philippine market,” he said.