PCC approves JTI-Mighty deal

MANILA, Philippines - The Philippine Competition Commission (PCC), the government’s anti-trust body has approved Japan Tobacco Inc. (JTI)’s acquisition of Mighty Corp. from the Wongchuking family.

PCC approved the deal, valued at P46.8 billion, following a meeting yesterday.

“There appears to be no ability nor incentive for the parties to engage in anti-competitive coordinated behavior,” the PCC said yesterday.

Sought for comment, Caesar Wongchuking, one of the sons of Mighty founder Wong Chu King, told The Star that “the family welcomes the approval” but stressed that they have not received any formal notification as of press time.

The PCC said sufficient competitive constraints remain from other market participants after the sale.

Under the transaction, JTI Philippines will own the sales and distribution network, manufacturing and equipment and inventories of Mighty while JT International SA (JTI SA), an affiliate of JTIP, will own the trademarks and associated intellectual property of Mighty and Wong Chu King Holdings Inc.

JTIP is a company engaged in the business of importation, manufacturing, distribution and marketing on wholesale basis of tobacco products, while JTI SA is a global company engaged in the manufacture and sale of tobacco products.

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

In announcing the deal, JTI president and CEO Eddy Pirard said the acquisition would enable the company to continue expanding and leverage on Mighty’s nationwide distribution network.

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.

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 currently 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 the fiscal year 2017, it said. Payment will proceed soon after the PCC approval.

According to JTI’s earlier disclosure, Mighty’s gross sales reached P18.8 billion last year Operating profit amounted to P600 million.