Philip Morris, Fortune Tobacco merge

ABS-CBN News

Posted at Feb 25 2010 11:32 AM | Updated as of Feb 25 2010 08:30 PM

MANILA, Philippines - Cigarette maker Philip Morris Phils. Manufacturing Inc. (PMPMI) and local cigarette firm Fortune Tobacco have merged to form Philip Morris-Fortune Tobacco Corp., creating a virtual cigarette monopoly in the country.

The deal is expected to be announced at noon Thursday in a press conference.

On Wednesday night, 3 separate sources of ABS-CBN News said Philip Morris will announce that it is acquiring majority control of its rival Fortune Tobacco via a merger.

Neither company is listed on the Philippine Stock Exchange, but disclosures overseas by Philip Morris show that the company earned over US$2.4 billion dollars in 2009 in Asia alone.

The merger would result in a company with a virtual monopoly on cigarettes that combines Fortune Tobacco's estimated 60% share of the cigarette market and Philip Morris's estimated 30% share.

The Philippines is the 15th largest consumer of cigarettes in the world, and the second largest in Southeast Asia, consuming as much as 80 billion sticks a year, according to the World Health Organization.

Reporting for ANC on Thursday morning, ABS-CBN News' Ricky Carandang said the merger could be a move by Tan to sell in order to avoid internal problems.

"The stories in the Chinese business community is that Mr. Tan is aging, he's ill, he's having succession problems, and therefore, rather than have his family fight over Fortune Tobacco, he has just decided to just sell this significant stake to Philip Morris," Carandang said.

Carandang said this would be the first time for Tan to lose control of Fortune Tobacco, and that it may be the start of several changes in the firm.

"The question now is whether this is just the first of other steps that will eventually lead to Philip Morris acquiring an even larger share of Fortune Tobacco," Carandang said. -- with a report from ANC; ABS-CBN Business