Feb. 25 (Bloomberg) — Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp. formed a venture that will supply 90 percent of the 85 billion cigarettes smoked each year in the Southeast Asian nation.
Philip Morris, which started Philippine operations in 1955, manufactures Marlboro and other brands. Fortune, which started tycoon Lucio Tan on his way to becoming the Philippines’ second- richest man, produces foreign brands including Hope and Winston, aside from its own cigarettes.
The new company will manufacture and sell all the products of its two parents, Chris Nelson, managing director of Philip Morris Philippines told reporters in Manila today. Nelson, who will be president of the 50-50 venture, declined to say what each partner will put into the company.
“Think of the potential savings and synergies in distribution costs,” said Ed Francisco, president of BDO Capital & Investment Corp., which arranged a 20 billion peso ($432 million) loan to Fortune. “Imagine how much stronger and more profitable it can be.”
The companies will contribute “selected assets and liabilities,” in the venture, Nelson said. They will be “equal partners” in the tie-up, which will be called PMFTC Inc.
Philip Morris Philippines had revenue of 32.8 billion pesos in 2008 while Fortune Tobacco had 33.2 billion pesos, according to Securities and Exchange Commission data.
“We are happy with the 50-50 percent,” Harry Tan, brother of Lucio Tan, said at the same briefing.