The JT Group has signed agreements to acquire assets related to the tobacco business of Mighty, which includes its distribution network, manufacturing equipment, inventories and intellectual property.
Expected to be completed in the third quarter of this year following regulatory clearances, the deal involves an Asset Purchase Agreement with Mighty for $560 million (P28 billion), and Intellectual Property Assignment Agreement mainly with both Mighty and Wong Chu King Holdings Inc for $376 million (P18.8 billion).
Founded in 1945, Mighty is the second largest local tobacco company with a 23 per cent share of market in the Philippines, the 10th largest tobacco market in the world, Japan Tobacco said in its statement.
Mighty is facing three tax evasion charges before the Department of Justice (DOJ), worth P37.88 billion. The cigarette maker will use the proceeds from the sale to settle its tax liabilities, seen to become the largest amount of tax collection from a single taxpayer.
According to Japan Tobacco, Mighty holds a leading position in the value segment, which accounts for more than 50 per cent of the industry volume, with strong local brands such as Mighty and Marvels. Its established distribution network reaches outlets nationwide.
For the JT Group, acquiring Mighty will enable them to consolidate their business foundation through expanded distribution and a strengthened brand portfolio, providing the JT Group with more than a quarter of market share in a country with a growing economy.
“I am confident that this acquisition will enable our continued expansion in the market and will allow us to leverage MC’s unique brands and their nationwide distribution network in the very near future,” said Japan Tobacco president and CEO Eddy Pirard.
The JT Group has been in the market for an extended period of time and increasing its presence mainly driven by Winston, a sub-premium product, notably in the urban areas of the Philippines.
Japan Tobacco’s products are sold in over 120 countries and its globally recognized brands aside from Winston, are Camel, Mevius, LD and Natural American Spirit. With diversified operations, JT is also actively present in pharmaceuticals and processed foods.
JT Group executive VP and president of tobacco business Mutsuo Iwai, said the latest deal is an addition to the company’s geographic expansion for sustainable growth in the mid- to long-term.
“This major acquisition in South-East Asia adds to our recently announced full-scale entry into Indonesia, and will further enhance our business base in the region,” Iwai said.
Mighty Corp ended year 2016 with gross sales of P18.8 billion, and operating profit of P0.6 billion or approximately $12 million.