Japan Tobacco to buy Philippine cigarette maker Mighty Corp for $936m

Photo: Reuters

In a big-bang cross-border deal, Japan Tobacco Inc is set to acquire Philippine-based tobacco firm Mighty Corp for $936 million (P46.8 billion).

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.

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Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.