VP meets Sampoerna, reminds them of 'obligations'

Rendi A. Witular, The Jakarta Post/Jakarta

Vice President Jusuf Kalla has urged the Sampoerna family to keep the US$5 billion in proceeds from its sale of Sampoerna in this country.

PT Hanjaya Mandala Sampoerna, the nation's third largest cigarette producer, earlier this week announced that it had sold a majority stake, most of which belonged to the founding Sampoerna family, to U.S.-based cigarette giant Philip Morris International Inc. for Rp 48 trillion.

Speaking after meeting with the executives from both companies on Friday, Kalla said the government hoped the Sampoerna family would help maintain and improve the stability of the country's economy.

"Sampoerna will have a massive liquid fund from the selling of its company. We expect them to invest it in new projects in Indonesia and maintain the stability of the economy," Kalla stated.

There are concerns from government officials, as well as some stock market players, that Sampoerna will invest its money abroad, thus hurting the stability of the rupiah against the U.S. dollar -- a phenomenon known as capital flight.

Rumors have circulated around the stock market that the family could indeed retain its business interests here and engage in a number of infrastructure businesses, including power plants.

To this point, there has been no explanation made public by the family over its decision to end the 92-year tradition in the cigarette industry and sell to Philip Morris, the maker of Marlboro and L&M cigarettes.

The world's largest cigarette producer announced on Monday it would buy a 40 percent stake belonging to the founding family in publicly listed Sampoerna.

The shares will be priced at Rp 10,600 each, or a total of Rp 18.6 trillion.

As for the remaining shares, including those owned by the public, Philip Morris will make a tender offer at a premium price of 20 percent higher than the closing price of Sampoerna's shares on March 10, which ended at Rp 8,850.

Kalla said the deal also showed the rising confidence of the international business community toward Indonesia's economy, as well as the performance of the local corporate sector as it involved a huge investment for the long term.

"The deal is evidence of investor confidence toward us. There would not have been such a massive long-term deal if they (Philip Morris) were not sure about the country's current and future economic condition," he surmised.

During the meeting, Kalla also urged the Sampoerna family and Philip Morris to take care of the employees and try to avoid mass layoffs.

Meanwhile, Philip Morris International Vice President Andrew White stated after the meeting that the firm would keep Sampoerna shares listed on the Jakarta Stock Exchange, but would prevent public shareholders from selling their shares to the company.

White also said that there was currently no plan from Philip Morris to merge Sampoerna with the company's local subsidiary, PT Philip Morris Indonesia.

Sampoerna currently controls 19.4 percent of the country's cigarette market share, with its top-selling brands Dji Sam Soe and A Mild.

Last year, cigarette consumption here reached some 200 billion sticks with publicly listed PT Gudang Garam and non-listed PT Djarum -- the country's largest and second largest cigarette producers respectively -- accounting for some 80 percent of the market.

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