U.S. firm owns 97% stake in Sampoerna

Leony Aurora, The Jakarta Post, Jakarta

U.S. cigarette giant Philip Morris now controls 97 percent of the country's second largest cigarette maker PT Hanjaya Mandala Sampoerna and has appointed Martin King as the new president, replacing Michael Joseph Sampoerna.

As of business closing on Tuesday, approximately 57 percent of shares were irrevocably tendered at Rp 10,600 (US$1.13) per share, the two companies said in a joint statement released after an extraordinary general meeting of shareholders on Wednesday.

"However, we have no plans to take the company off the Jakarta stock market," said Philip Morris Asia Pacific President Matteo Pellegrini.

Pellegrini was appointed by the meeting as president commissioner of Sampoerna to replace the founder's grandson Putera Sampoerna, who will remain as an advisor to the company throughout the transition period.

The meeting appointed Martin King, formerly managing director for Philip Morris' China unit, to lead the company and retains Angky Camaro, Edward Frankel and Sugiarta Gandasaputra as directors, as well as two commissioners.

It adds Salman Hameed, Arndt Kottsieper and Andrew White to the board of directors.

King is upbeat that the new management, combining Sampoerna's market knowledge and Philip Morris' worldwide experience, will bring about greater growth, but said that it would not make sweeping changes.

"Sampoerna is very successful. You don't come and change it right away," he said.

In a surprise move in mid-March, Philip Morris through its local unit Philip Morris Indonesia acquired 40 percent of Sampoerna's shares, including those of the founding family, for Rp 18.6 trillion, or Rp 10,600 per share.

With the acquisition of the second largest clove cigarette maker in Indonesia, Philip Morris, which produces Marlboro cigarettes, aims to gain a larger market in the country.

Some 92 percent of the estimated 141 million smokers in Indonesia smoke clove cigarettes.

"We envision becoming the country's number one producer of cigarettes," said Pellegrini. Combined, Sampoerna and Philip Morris control a 25 percent market share in Indonesia.

Sampoerna was founded in 1913 by Lim Seeng Tee, who used to peddle his bike through the streets of Surabaya to sell his hand- rolled cigarettes.

Since then the company has grown to an astounding size, selling over 42 billion cigarettes in 2004 with premium brands such as Dji Sam Soe and A Mild.

Gudang Garam, which sold some 64.7 billion cigarettes last year, is Sampoerna's toughest competitor. Djarum is the third largest producer with some 39 billion cigarettes sold in 2004. Unlike Sampoerna, both companies have products for the lower end market segment.

Analysts have estimated that the country's cigarette industry will grow by 5 percent in terms of sales volume this year.

Sampoerna's Board of Commissioners:
President Commissioner: Matteo Pellegrini
Vice President Commissioner: Michael Murphy
Commissioner: Douglas Werth
Commissioner: Ekadharmajanto Kasih
Commissioner: Phang Cheow Hock

Sampoerna's Board of Directors
President Director: Martin King
Director: Salman Hameed
Director: Arndt Kottsieper
Director: Andrew White
Director: Angky Camaro
Director: Edward Frankel
Director: Sugiarta Gandasaputra