Philip Morris wraps up Sampoerna deal

Urip Hudiono, The Jakarta Post, Jakarta

U.S. tobacco giant Philip Morris has officially sealed its 98 percent control over Indonesia's second largest cigarette maker by sales PT Hanjaya Mandala Sampoerna, with the completion on Monday of a Rp 26.9 trillion (US$2.8 billion) payment for its purchase of the shares.

The payment, which was made for Philip Morris' purchase of 57.5 percent of Sampoerna's shares from the investing public through a tender on May 20, follows its previous acquisition in mid-March of 40 percent of Sampoerna's shares -- including those from the founding family -- worth some Rp 18.6 trillion.

"We have completed all of the payments for the shares as of today, paying Rp 10,600 for each share," Sampoerna director Angky Camaro told reporters, after a meeting with Minister of Finance Jusuf Anwar.

"The payment was conducted through Bahana Securities, and all of the funds were transferred here to the investors."

Angky, who along with Sampoerna's new president Martin King had met the finance minister to introduce the company's new management, further said that the government had welcomed the completion of the deal.

"The government responded well to our report of the deal's closure, particularly as all of the funds would remain in the country," he said.

Philip Morris' $5 billion investment into Sampoerna was expected to help lift the rupiah, which has recently been slumping against the U.S. dollar.

Indeed, Philip Morris' release of greenbacks for the deal was indicated as having balanced Monday's continuous strong dollar demand in the local forex market, resulting in the rupiah remaining flat at Rp 9,485 per dollar on Monday, unchanged from last week's closing day of Friday.

Meanwhile, concerning the government's plan to raise retail prices of cigarettes by up to 20 percent, Angky refused to comment, but hinted Sampoerna's objection to the idea.

"If we were to choose, then we would prefer the government not to raise the retail price," he said.

"Even if the price had to be raised, we hope it would not be too much."

The finance minister said last week that the government was planning to raise retail cigarette prices by between 15 and 20 percent in July, to increase state excise revenue as well as discourage smoking.

Elsewhere, the finance ministry's director general for customs and excise Eddy Abdurrachman dismissed objections from cigarette makers, but admitted that the plan would need further study for possible impacts on the country's tobacco industry.

"Many cigarette producers have accepted the plan, but they still differ on the exact level of the raise," he said. "Some don't mind a 20 percent increase, but others have said they would prefer a 10 percent rise."

Eddy went on to say that the Coordinating Minister for the Economy would discuss the plan further with stakeholders.

Nevertheless, word of the plan put a cloud over the local stock market on Monday.

Share prices of the country's largest cigarette maker Gudang Garam fell Rp 800 to Rp 12,650, while Sampoerna's shares also slipped Rp 100 to Rp 8,100.