Philip Morris, Fortune Tobacco in 'marriage of equals'

By Ricky Carandang, ABS-CBN News 02/25/2010 11:06 PM

MANILA, Philippines - It's being called a marriage of equals.

Philip Morris, maker of Marlboro, with a 30% share of the local cigarette market, and Lucio Tan's Fortune Tobacco, with a 60% market share, have agreed to combine their businesses under a 50-50 joint venture company called Philip Morris Fortune Tobacco Corp. (PMFTC) Inc.

The combined company will have a virtual monopoly of the local cigarette market, and will be managed by Philip Morris country manager Chris Nelson.

“The chairman of the PMFTC Inc. will be Lucio Tan, and I’ve got the honor of being the first president, and there will be executives from both companies in the management team,” said Nelson in an interview.

But it's an unprecedented move for the media shy Lucio Tan who did not attend the press conference.

Tan, who has been called the one of the country's richest men by Forbes magazine, has never been involved in a business he didn't control. And now, he has effectively ceded operational control of his flagship business to a foreign-owned company despite the fact that he has the bigger market share.

His brother Harry offered an explanation.

“The problem in any business decision is not 100% purely that you’re looking at the market share, but you’re also looking for other, profitability and efficiency, the way how management…the way that you carry, you know, the professional management of the company. So the reason we’re entering to this one is surely not just one factor but many other factor that we’re thinking a multiple effect that which would achieve you a lot of cost saving which is a waste, I mean to say this can be, nobody make it just a waste, but because of this synergy, you can save a lot of this thing of the waste,” said Harry in the press conference announcing the new joint venture.

But many observers say there's more to this deal than meets the eye. Among the Chinese business elite, there has been consistent talk of Tan's poor health and the problems of succession.

Tan has been involved in a very public dispute with his brother Mariano Tanenglian, who until recent years, was his most trusted consiglieri.

Mariano has even threatened to testify against Lucio in the Marcos wealth cases.

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.

Neither Harry Tan nor Philip Morris's Chris Nelson would address the issue directly.

“It’s not fair to speculate so it’s conceivable. But frankly speaking, we’re not looking at that. What we’re looking at is that they offer, as I said, expertise in the domestic business. I think we bring skill set for international, and we look forward to marrying that together,” said Nelson.

But Harry did admit that if they sell out, they would be required to offer their shares in PMFTC to Philip Morris.

“So far, we are happy with what, you know, just like marriage, 50-50. Whatever the property, the earnings. And we’re not even thinking of divorce. Today is just our marriage day. Hopefully you will recommend the question that we are going to divorce – I buy you out or you buy me out,” Tan said.

Whatever the case may be, two former rivals are now 50-50 partners in the largest cigarette maker in the country in an arrangement that seems more like an long affair than a permanent marriage.


Anonymous said...

Ayun! Naubusan na ang pera ni kapitan sa pagkukurakot ng mga anak niya sa kabila! Mga kapatid niya! Mga bayaw at hipag niya at mga asawa niya sa labas! Ngayon, gusto na niya ibenta and mga key companies na "money making".

Anonymous said...

Yesterday’s union was the culmination of the overtures, if the pro-Tan grapevine is correct, made by Philip Morris since 2004, a courtship that ironically received a push and an urgency from an unlikely quarter—Lucio Tan’s second brother and fallen financial man, Mariano Tanenglian.

Anonymous said...

Mariano was expected to run the Tan empire until the lines of succession between his numerous children became more clear.

Anonymous said...

Tan has been involved in a very public dispute with his brother Mariano Taneligan, who until recent years, was his most trusted consiglieri.

Anonymous said...

Lucio Tan has been designated as chairman of the new venture, and is joined in the board by wife Carmen, and sons Lucio Jr. and Michael, and brother Harry.

Anonymous said...

Kapuk Muara is a poor village as well as a slum neighborhood with ten thousand residents located at the edge of the city Djakarta near the Angke River. It is also known as the “Black Heart” because of its heavily polluted river. Tzu Chi had partnered with the local government to clean up the river, widen the river beds to provide safe passage of water during flooding, and to build housing for the poor. It took more than a year to finish these projects.

Anonymous said...

Nurture your bodhi seeds--
Let sincerity, integrity, faith, and honesty be the soil.
Let kindness, compassion, joy, and unselfish giving be the breeze.
Let wisdom and the Buddha’s teachings be the pure water.
Let dedication, ardor, and diligence be the sunlight.

Anonymous said...

Lucio Tan’s once most-trusted sibling Mariano Tanenglian is now at bitter loggerheads with the taipan, challenging him in courts and even through the mass media, causing outside observers to speculate about the long-term future of the empire before this merger deal.

Anonymous said...

Calling A Spade... -- Solita Collas-Monsod

Slugging it out with Lucio Tan
I saw it in one broadsheet. The chances are, given the subject, other newspapers carried it. It was a picture showing Lucio Tan receiving a framed copy of a resolution by the South Cotabato Provincial Board declaring him an adopted son of the province. He was surrounded by Representative Darlene Antonino Custodio, a provincial board member (described as representing Governor Daisy Fuentes), and Tan’s wife, Carmen.

The picture’s caption, entitled "Adopted Son," extolled Tan thusly: "Tan, 75, whose businesses include airlines, banks, breweries, agri-ventures among others has a big presence in Mindanao that provide employment to thousands of workers." And to make sure the reader did not fail to notice how important the subject was, the photo was at least double the size of the two other pictures on the page combined -- Comelec’s Larrazabal taking delivery of the last batch of voting machines, and Fidel and Ming Ramos at the launching of a book on the Ramos presidency.

What’s wrong with the picture and its caption? Well, let’s start with what’s right: Carmen Tan beside her husband, instead of his reported number two (out of, supposedly at least 13). But that is all.

Anonymous said...

Dearly beloved, avenge not yourselves, but rather give place unto wrath: for it is written, Vengeance is mine; I will repay, saith the Lord.

Anonymous said...

you guys just sourgriping. you cannot accept that kapitan one upped everybody.