http://www.manilastandardtoday.com/insideNews.htm?f=2010/february/25/news1.isx&d=2010/february/25
Tobacco giants Fortune, Philip Morrios to merge
by Victor C. Agustin and Ray S. Eñano
LONG-TIME bitter competitors Fortune Tobacco of taipan Lucio Tan and Philip Morris have agreed to bury the hatchet and merge their manufacturing and marketing operations in the Philippines, the Manila Standard Today has confirmed.
The merged company, tentatively called PMFTC, will control 92 percent of the still growing Philippine tobacco market.
Philip Morris has scheduled a press conference this noon “to announce a major development that will impact the Philippine tobacco industry,” with no less than Asia-Pacific president Matteo Pellegrini, Tan, and Philip Morris Philippines managing director Chris Nelson attending.
According to sources close to the transaction, the merged company will be controlled by Philip Morris by virtue of its 50-percent-plus one share majority in the new company.
The same sources said the merger was facilitated by Tan’s younger brother, Harry, who was worried about the succession problems that could befall the multi-billion empire given the bitter feud between Lucio Tan, who is turning 76 this year, and the second brother, Mariano Tanenglian.
With the merger, Philip Morris and Fortune Tobacco will effectively divide the Philippine market between themselves, with the US tobacco giant controlling the higher end with its Marlboro and Philip Morris brands, and Fortune with its Hope, Fortune, Champion and Boss cigarettes.
Philip Morris maintains a regional manufacturing facility in a 25-hectare complex in Tanauan City, Batangas.
The Tanauan factory, inaugurated in May 2003, can roll out up to 40 billion cigarette sticks a year.
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"The stories in the Chinese business community are that Mr. Tan is aging, he's not in good health, and he's had succession problems. It's not clear at this point who is going to take over. He's had disputes with his brother, so given the lack of clarity about succession and his health, the decision was made to go with this merger," Carandang said.
Carandang said there was also talk in the Chinese community that "Mr. Tan was apparently the first to approach Philip Morris about this deal."
Tan was granted concessions by former President Ferdinand Marcos that resulted in a virtual monopoly for over 4 decades. -Lala Rimando, abs-cbnNEWS.com/Newsbreak
Critics: Philip Morris, Fortune merger will lead to more corruption, less tax collection.
Mariano was expected to run the Tan empire until the lines of succession between his numerous children became more clear.
But so far, family disputes have prevented a clear succession. With the succession unclear, and with his health reportedly failing, Tan seems to have opted to gradually sell his tobacco business.
http://news.google.com/newspapers?id=RFM1AAAAIBAJ&sjid=ZyUMAAAAIBAJ&pg=2737%2C3428536
The deal could allow Mr Tan to leave his flagship company in able hands, defusing a potentially divisive succession issue. Last year, a rift prompted a younger brother, Mariano, to turn against Mr Tan, offering to give evidence in a government case against the businessman.
“It reflects a possible strategic move to ensure long-term stability of his [business] empire because he knows his kids and siblings may not be as good as he is in running businesses,” says Wilson Lee Flores, a business commentator.
The market logic may be compelling for both groups, but the deal has come as a surprise for Mr Tan’s associates.
They say that to enter into equity joint ventures with a strategic partner does not seem to fit the style of the 75-year tycoon who during the last five decades has built many of his businesses from the ground up.
Somebody is not happy. Somebody has been left out of the biggest deal of the year
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