JTI-Mighty buyout deal sparks LTG share rally

MANILA, Philippines - Share prices of the LT Group continue to rally following the signing of a deal that allowed Japan Tobacco Inc. to acquire Mighty Corp. , a move which analysts said would translate to fair competition in the industry.

On Friday, LTG shares closed 2.5 percent higher at P17.96 after hitting a high of P18 each, just days after the Tokyo-headquartered tobacco giant signed an agreement to buy Bulacan-based Mighty. from the Wongchuking family for P46.8 billion.

The deal is still subject to the approval of the Philippine Competition Commission.

Analysts said the transaction bodes well for the LT Group whose 99.6 percent subsidiary Fortune Tobacco is the partner of US tobacco giant Philip Morris Manufacturing Inc. in PMFTC, the country’s biggest tobacco player.

PMFTC, which previously accounted for 90 percent of the local cigarette market, now has a 71 percent market share as it struggled with illicit trade practices in the industry.

Over the past several months, the Bureau of Internal Revenue had filed tax evasion complaints against Mighty amounting to roughly P35.5 billion for alleged use of fake tax stamps, which Mighty repeatedly denied.

As a multinational company, JTI is seen adhering to fair market competition.

Astro del Castillo, managing director at First Grade Finance Inc said the industry would be better with fair competition and a level playing field, which would benefit all players including LTG.

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.