Tobacco giants Fortune, Philip Morris to merge

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.

What is the Lucio Tan Group of Companies without Mariano

http://www.abs-cbnnews.com/business/02/25/10/philip-morris-fortune-tobacco-merge-rp-operations

Philip Morris, Fortune Tobacco form joint venture

MANILA, Philippines (1st UPDATE) - Cigarette maker Philip MorrisPhils. Manufacturing Inc. (PMPMI) and local cigarette firm FortuneTobacco have merged to form Philip Morris-Fortune Tobacco Corp.,creating a virtual cigarette monopoly in the country.

The deal was finalized Thursday morning and was scheduled to beannounced at 12:30 p.m. Thursday in a press conference.

A source privy to the transaction told ABS-CBN News' RickyCarandang that the merged company will be owned 50-50 by the twoformer rivals, and that the merger only involves their Philippine operations.

Fortune Tobacco's Lucio Tan will be the chairman of Philip Morris-Fortune Tobacco Corp., while Chris Nelson, Philip Morris' countrymanaging director will be the president of this new company, the source said. Day-to-day operations will reportedly be underNelson's responsibility

Sources earlier told ABS-CBN News that Tan would have a minorityshare in the firm, but a source said Thursday this was incorrect.

It has not been disclosed how much the deal is worth.

Neither company is listed on the Philippine Stock Exchange, butdisclosures overseas by Philip Morris show that the company earnedover US$2.4 billion dollars in 2009 in Asia alone.

The merger would result in a company with a virtual monopoly oncigarettes that combines Fortune Tobacco's estimated 60% share ofthe cigarette market and Philip Morris's estimated 30% share.

The Philippines is the 15th largest consumer of cigarettes in theworld, and the second largest in Southeast Asia, consuming as muchas 80 billion sticks a year, according to the World Health Organization.

Reporting for ANC on Thursday, Carandang said the merger could be amove by Tan to sell in order to avoid internal problems.

"The stories in the Chinese business community are that Mr. Tan isaging, 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 haddisputes with his brother, so given the lack of clarity aboutsuccession and his health, the decision was made to go with thismerger," Carandang said.

Carandang said there was also talk in the Chinese community that"Mr. Tan was apparently the first to approach Philip Morris aboutthis deal."

He also reported that "it's not clear also at this point whetherthere'll be further consolidation."

"The question now is whether this is just the first of other stepsthat will eventually lead to Philip Morris acquiring an even largershare of Fortune Tobacco," Carandang reported. -- with a report from ANC

---

MANILA, Philippines (3rd UPDATE) - The Philippine unit of Philip Morris International and unlisted Fortune Tobacco Corp. (FTC) will combine their core businesses in a new company which will control 90% of the local cigarette market.

"Philip Morris and Fortune Tobacco concluded an agreement to form a new company called PMFTC," Chris Nelson, president of Philip Morris Philippines, told reporters.

"It's 50-50, it's an equal marriage. We are not going to divulge the financial details," Nelson said.

When asked which group initiated the talks, Nelson said: "We kissed at the same time."

The new company will command a dominant position in the local tobacco market, with Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco, owned by one of the country's richest men, Lucio Tan, having a combined share of about 90%.

Philip Morris—which sells Marlboro cigarettes and is the world's largest non-state-owned tobacco firm, with over $2.4 billion earnings in Asia last year—considers the Philippines its 12th-biggest market. Through the new firm, it gains wider access to the local cigarette market, including the profitable medium- to low-priced segments.

A joint statement said Fortune Tobacco and Philip Morris "each contributed selected assets and liabilities into the new company, with each party holding an equal economic interest."

Philip Morris will retain its export business, shipping cigarettes mostly to Thailand. It declined to give the value of the export business.

Fortune Tobacco will keep its interest in the distribution of the Winston brand of Japan Tobacco Inc., the statement said. It also said the new firm would not be affected by pending tax and ownership disputes with local courts involving Fortune.

Top player

Philip Morris has dominated the high-end cigarette market in the Philippines for years while Fortune Tobacco is the top player in the medium to low-priced cigarette segment, with a 60% share of the entire industry.

"By uniting our business operations with a well managed and successful company that has an outstanding distribution and manufacturing infrastructure like FTC, we are laying the foundation for the long term success of PMFTC Inc.," Nelson said.

"While Philip Morris currently competes mainly in the premium price segment, FTC's strength is in the value and medium priced segments. Thus, PMFTC Inc will have a representation in all segments of the Philippine market," he said.

The Philippines is the 15th largest consumer of cigarettes in the world, and the second largest in Southeast Asia, consuming as much as 80 billion sticks a year, according to the World Health Organization.

Tan's decision to sell

Reporting for ANC on Thursday morning, Carandang said the merger could be a move by Tan to sell in order to avoid internal problems.

"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."

He also reported that "it's not clear also at this point whether there'll be further consolidation."

"The question now is whether this is just the first of other steps that will eventually lead to Philip Morris acquiring an even larger share of Fortune Tobacco," Carandang reported. --With reports from Reuters, ANC, ABS-CBN News

...Capital Crime Hurled Against a Citizen... [Mayor being persecuted by politicians]

http://politics.inquirer.net/view.php?db=1&article=20100209-252284


February 09, 2010 22:54:00
Neal Cruz opinion@inquirer.com.ph
Philippine Daily Inquirer

... Another capital crime hurled against a citizen is the kidnapping rap filed against Tsinoy businessman Mariano Tanenglian, his wife and their two children. The crime is non-bailable. Again, there is no motive. The supposed victim is a former housemaid. Why would a Tsinoy tycoon kidnap his own housemaid, whose relatives cannot afford to pay ransom? What would he have gained from kidnapping a housemaid?....

Manila Leader, Ally of Poor, Now Courts the Rich

http://www.nytimes.com/1998/12/13/world/manila-leader-ally-of-poor-now-courts-the-rich.html?pagewanted=all
By MARK LANDLER
Published: December 13, 1998

MANILA, Dec. 12— Joseph E. Estrada won a smashing victory seven months ago in the Philippine presidential election as a champion of the poor. But today, diplomats, business people and politicians say, Mr. Estrada is mainly benefiting the rich, the very people he inveighed against.

Some people here fear that under Mr. Estrada's relaxed style of leadership, the Philippines is drifting back into corruption and cronyism, a hallmark of the country's deposed dictator, Ferdinand E. Marcos, and an occasional weakness of his successors, Corazon C. Aquino and Fidel V. Ramos.

Since taking office in June, Mr. Estrada has helped nudge one of his main campaign contributors into the top job at the San Miguel Corporation, the biggest company in the Philippines. He has worked to rescue Philippine Airlines, which is controlled by another wealthy supporter. And he paved the way for a politically connected Hong Kong company to acquire control of Philippine Long Distance Telephone.

Two recipients of Mr. Estrada's aid were notorious cronies of the late Mr. Marcos: Eduardo Cojuangco, scion of one the most powerful Filipino families, who now runs San Miguel, and Lucio C. Tan, a billionaire who controls Philippine Airlines and is considered the richest man in the Philippines.

"It's something we are watching and worrying about," said Guillermo Luz, the executive director of the Makati Business Club, which represents corporate interests. "Because it's not just the old cronies who are coming back. It is the practice of cronyism that is coming back."

To be sure, nobody is comparing Mr. Estrada to Mr. Marcos, who awarded vast monopolies to trusted supporters and is suspected of looting billions of dollars during his 20-year rule. But Mr. Estrada's actions are raising eyebrows even in a country where high-level corruption is endemic.

"Everyone has been rooting for him to succeed," said Sergio Osmena, a member of the Philippine Senate who was jailed by Mr. Marcos. "But sometimes you neglect moral principles in paying back debts."

Adding to the fears of resurgent cronyism is the strange case of Imelda Marcos, the widow of Mr. Marcos. After denying for more than a decade that she and her husband plundered the country, Mrs. Marcos unexpectedly announced on Monday that she intended to sue several Marcos cronies to recover more than $12 billon in assets that her husband amassed during his presidency.

"We own practically everything," Mrs. Marcos said in an interview with The Philippine Inquirer. Her admission left officials here flummoxed, since they have spent more than a decade fruitlessly prosecuting the Marcos family.

Advisers to Mr. Estrada denied that the President was engaged in Marcos-style cronyism. They said his critics were distorting well-intentioned gestures by Mr. Estrada.

"In the first place, crony capitalism only thrives in an autocratic or dictatorial government," said Edgardo B. Espiritu, the Finance Secretary and one of Mr. Estrada's closest advisers. "In a system that is democratic, everyone must compete in a field that is supposed to be level."

Mr. Espiritu acknowledged that Mr. Estrada had befriended some powerful tycoons. But he added: "You may be a friend of the President, you may be a friend of politicians. But if you want to survive in the field, you have to be efficient, and you have to be ready to compete."

Mr. Estrada's ties to wealthy business executives contrast with his careful cultivation of an image as friend of the common man. Even on screen, the 61-year-old former actor often played Robin Hood characters.

With his generous paunch, garbled diction and Elvis Presley-style coiffure, Mr. Estrada put off many affluent, educated voters. But those same qualities made him a hero to poor voters.

Even now, rank-and-file voters believe that Mr. Estrada is looking out for them. The President's approval ratings are among the highest of any Filipino leader and have not been damaged by charges of cronyism.

"My dedication to the poor will be unwavering," Mr. Estrada said in an interview last month at the Asia Pacific Economic Cooperation summit meeting in Malaysia. "But I would say that although we are pro-poor, we are not anti-rich. We are pro-business because I believe business leads to growth."

Indeed, political strategists here said Mr. Estrada's campaign was financed by some very rich business people, notably Mr. Tan and Mr. Cojuangco. It is difficult to determine exactly how much they contributed because laws on disclosing campaign contributions are riddled with loopholes. But several political experts said Mr. Tan was the largest donor

It is clear that he has easy access to the President. During the summit meeting in Malaysia, Mr. Tan hovered at the back of the room while Mr. Estrada gave interviews to foreign journalists.

"He owes Lucio Tan a lot of favors," said Alexander R. Magno, president of the Foundation for Economic Freedom, a research group.

Mr. Tan has been struggling for months to rescue Philippine Airlines, the nation's flagship airline, which he took over in 1994 and which is $2.1 billion in debt. Mr. Estrada has plunged into the rescue effort, brokering an agreement between the airline and its union, and trying to attract foreign carriers to invest.

Mr. Estrada insists that the Government will not bail out Philippine Airlines, but he also says that he will not allow the nation's flag carrier to fail. As a result, he is likely to grant a request from Mr. Tan that would tighten restrictions on rivals and make it harder to compete with Philippine Airlines. And the Government is trying to line up public and private bank loans for Mr. Tan's company.

At San Miguel, the giant beer and beverage company, the Government's role was less direct. Mr. Cojuangco had been frustrated that he could not take control of the company even though his family owned 20 percent of its shares. A Philippine court had denied him the right to vote the shares because of charges that his family got them unlawfully during the years of Marcos rule.

Just before Mr. Estrada took office in June, however, the court finally allowed Mr. Cojuangco to vote his shares. He soon persuaded other stockholders -- including the Government, which owns 27 percent of the shares -- to support his effort to oust the chairman. Senator Osmena said Mr. Estrada's advisers pressed other shareholders to accede to Mr. Cojuangco.

Some political experts contend that although the Marcos-era cronies are making a comeback, the Philippines now has more vigorous institutions, like the legislature and the news media, to blunt their influence.

However, at a conference here on Dec. 4, the former American Ambassador to the Philippines, Nicholas Platt, warned that Americans were reluctant to invest because of a perception that cronyism is on the rise. Mr. Platt said investors were particularly skeptical of the Philippine courts, which have failed to convict either Mrs. Marcos or her husband's associates.

"The Philippines is a forgiving society, an engaging trait to many," Mr. Platt said. "But international investors ask whether they will get a fair hearing or a rapid resolution when involved in a dispute here."

PAL union files notice of strike over cost-cutting

http://www.gmanews.tv/story/182898/pal-union-files-notice-of-strike-over-cost-cutting

A strike notice has been filed by employees of Philippine Airlines (PAL) over a cost-cutting plan aimed at stabilizing the flag carrier's finances.

But going to the picket lines remains a last option, the Philippine Airlines Employees' Association (PALEA) said, noting that the strike notice was supposed to get the government involved in settling a dispute over the airline's plans.

"The decision to file a notice of strike is to attain the highest degree of participation and involvement of the government in resolving the current situation in PAL," PALEA President Edgardo C. Oredina told BusinessWorld.

"We feel that negotiations in the NCMB (National Conciliation and Mediation Board) would not go anywhere without the government's intervention and help in negotiations," he added.

"[A] strike, however, is only a worst case scenario," he pointed out.

In its strike notice, PALEA cited "intended mass lay-off of union members and officers by April 2010, illegal outsourcing of regular positions, direct negotiations with union members, unresolved issues during preventive mediation, and noncompliance [with] pay scale review during settlement of the wage distortion."

Last August, PAL President Jaime J. Bautista announced that the airline needed to adopt cost-cutting measures amid a global industry downturn. Among the options being considered, he said then, were aircraft sales, cutting routes, lay-offs and a search for a white knight.

Both management and the union began negotiations regarding the outsourcing of noncritical jobs in September. PALEA requested for preventive mediation from the NCMB that month and then asked for the suspension of talks in October, citing the lack of progress.

The DoLE stepped in but was unable to present an early retirement plan acceptable to PALEA, which also asked Malacañang to intervene.

Oredina said the government must either "help the flag carrier financially to either survive and keep all of its current employees or to provide acceptable separation pay to those willing to be retrenched."

"Policies that do not protect the flag carrier are one cause of the falling revenues. The government must be willing to put PAL under rehabilitation and infuse fresh capital to it to save it and our jobs because if something happens to the flag carrier it is a black mark on the government," he said The Labor department, said Oredina, would be calling a meeting between PAL and PALEA this week.

PAL management, for its part, urged the union to look at the "bigger picture and rise to the occasion." "The management of Philippine Airlines is deeply saddened by the decision of PALEA to file a notice of strike at this critical juncture when the airline is struggling to stabilize its finances as a result of the worst-ever downturn in the global aviation history," it said in a statement.

"We urge PALEA to look at the bigger picture and rise to the occasion. It is particularly instructive to consider the example of other legacy flag carriers, where management and employees have shown the will to make sacrifices to save the company." It added that it was continuing to communicate with PALEA and hoped that negotiations would be civil and open.

The Labor department normally assumes jurisdiction over labor disputes that are in the national interest. Labor Secretary Marianito D. Roque declined to comment, saying it could prejudice the case.

"There are long and complex talks ahead but the main point is to save the flag carrier. We are not for outsourcing but we are open to options for the sake of our members," Oredina said — Emilia Narni J. David, BusinessWorld

Philippine Airlines union files strike notice

http://business.inquirer.net/money/breakingnews/view/20100201-250728/Philippine_Airlines_union_files_strike_notice


MANILA - A union representing Philippine Airlines (PAL) ground staff said Monday it had notified the government of its intention to call a strike in a dispute over the outsourcing of the airline's services.

Edgar Oredina, the head of the PAL Employees' Association (PALEA), said the "notice of strike" had been filed to force the government to become involved in resolving the dispute, which began in August.

"Before, we resorted to preventive mediation but since nothing happened, we converted this to a notice of strike. Once we file that, we put the negotiations on a higher level," Oredina told Agence France-Presse.

He said that actually embarking on a strike was "the worst-case scenario" and that the union was using the threat of a strike to prompt the labor secretary or even President Gloria Macapagal-Arroyo to become involved.

"PAL has an outsourcing plan that would mean a lot of people would be gone from PAL. We are not asking for higher wages. This is just for job security," he said.

Oredina said it was proper that the government became involved because "the government contributed to this. The government had many policies that affected the revenues of PAL."

PALEA represents about 3,900 PAL employees in such areas as ground handling, maintenance and cargo operations, accounting for more than half of the national flag-carrier's 7,000 employees, Oredina said.

The airline said it was saddened by PALEA's move, which comes as "PAL is in an urgent financial predicament, with limited time and options."

It urged the union "to look at the big picture" of how the airline is trying to cope with a severe downturn in the global aviation industry.

PAL assured the public that all its operations would continue as normal.

Labour Department officials in charge of mediating strike threats said their agency's chief would meet union and PAL representatives on February 4.

In August, PAL said it would cut staff and realign operations after reporting a $301.4-million loss in the past fiscal year as it was hit by rising fuel costs.