BAT eyes large savings from Rothmans acquisition

JAKARTA (JP): PT British American Tobacco (BAT) Indonesia said on Tuesday that the company's Rp 210 billion (US$30 million) acquisition of PT Rothmans of Pall Mall Indonesia would enable it to save Rp 40 billion in annual operational costs.

BAT Indonesia finance director Martin Mueller said that after the acquisition the company would have a reduced executive salary burden, reduced network distribution costs and greater economic scale.

Mueller said the company, which after the acquisition would have total combined assets of Rp 840 billion, would be led by one board of directors only.

"There will also be meaningful cuts in the distribution network to reduce overhead cost," Mueller said after the company's extraordinary shareholders' meeting.

He said the company would also have a better negotiating position with its raw material suppliers because it could order in a greater variety of supplies.

First announced in mid-November, the BAT Indonesia acquisition of over a 99.99 percent stake of PT Rothmans of Pall Mall Indonesia received on Tuesday the approval of its shareholders.

Company president Mark Jennings said some 95 percent of BAT Indonesia shareholders were present at the voting of the proposed acquisition plan, with 82 percent agreeing to the deal.

Jennings said the acquisition would be funded by a bridging loan from the BAT Group, which would be repaid with proceeds from a rights issue to be conducted by the company in the first quarter of next year

Mueller said the loan would be on a tenor of between three and four months, with the interest rate put at plus one percent JIBOR (Jakarta Inter-Bank Offered Rate).

"The (bridging) loan is needed so we are able to move quickly in the uncertainty," Mueller said.

He said the acquisition was part of the global merger of British American Tobacco plc and Rothmans International BV.

With domestic operations beginning in 1917, the Jakarta Stock Exchange-listed company is one of the country's oldest cigarette producers.

It produces regular brands including Lucky Strike, Kent, State Express 555, Kent, Benson & Hedges, Ardath and Commodore.

As of October this year, the company had produced a total of 15.40 billion cigarettes.

Its unaudited assets were valued on Sept. 30 this year at Rp 684.5 billion ($97.8 million), up from Rp 523 billion in the corresponding period last year.

The company recorded a net income of Rp 73.4 billion in the first nine months of the year, as compared to Rp 19.3 billion in the same period last year.

Rothmans of Pall Mall Indonesia, a unit of Australia's Rothmans Holding Limited, had assets valued at Rp 224.2 billion.

It was previously known as PT Faroka, a cigarettemaker established in 1932 in Malang, East Java. The company changed its name in 1987 to Rothmans of Pall Mall Indonesia.

Rothmans has about a 20 percent share in the domestic regular (non-clove) cigarette market, with two primary brands Dunhill and Kansas. (udi)