JTI inks P46.8-B deal to buy out Mighty

PCC expects to finish review by mid-Sept

MANILA, Philippines - Japan Tobacco Inc. (JTI) signed yesterday an agreement to acquire the assets of Mighty Corp., the Bulacan-based cigarette firm owned by the Wongchuking family, for a total of P46.8 billion.

A review of the deal, currently pending with the Philippine Competition Commission, is expected to be concluded in the third quarter of the year.

In an interview with The Star, PCC chairman Arsenio Balisacan said the commission expects to conclude its review within the regular 30-day timetable or by mid-September as both JTI and Mighty have submitted complete documents.

“The review has started,”  Balisacan said.

In a statement yesterday, JTI, the parent company of JTI Philippines, said the assets to be acquired include Mighty’s distribution network, manufacturing equipment, inventories and intellectual property.

Mighty’s assets include three operating plants in its sprawling 9-hectare factory in Malolos, Bulacan, a state-of-the-art tobacco processing plant and two cigarette manufacturing facilities.

“I am confident that this acquisition will enable our continued expansion in the market and will allow us to leverage Mighty’s unique brands and their nationwide distribution network in the very near future,” said Eddy Pirard, JTI president and CEO.

JTI, which is behind the Winston, Camel and Mevius brands, said the transaction would enable the group to consolidate its business foundation through expanded distribution and a strengthened brand portfolio, providing it with more than a quarter of market share in a country with robust economic growth.

“This transaction is another example of our 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,” said Mutsuo Iwai, executive vice president and president of JTI’s tobacco business.

 Mighty is the second largest tobacco company in the country with a 23-percent share of the market, next to market leader PMFTC, a partnership between Philip Morris and Lucio Tan’s Fortune Tobacco, which has a 71-percent share. JTI at present, accounts for 4.2 percent of the market.

 JTI said Mighty holds a leading position in the value segment, which accounts for more than 50 percent of the industry volume, with local brands Mighty and Marvels. 

The transaction will be funded by the JT Group’s existing cash and loan facilities, and will not have any material impact on the JT Group’s consolidated performance for fiscal year 2017.

According to JTI’s disclosure, Mighty’s gross sales reached P18.8 billion last year with operating profit at P600 million.

Documents obtained from the Securities and Exchange Commission showed that Mighty posted a profit of P153.4 million in 2014, higher than the P104.1 million recorded in 2013.  Sales rose to P11.8 billion in the same year from P11.08 billion.

[Note: Mighty Corp.'s factory was incorrectly reported as having land area of 900 hectares. The story has been edited to reflect the actual area, which is 9 hectares.]