Philip Morris Makes Bid for Indonesian Company

Philip Morris International Inc. has made a $5-billion offer for Indonesia’s third-largest cigarette producer, a move that would fatten its share of the country’s fast-growing tobacco market while health concerns put a squeeze on smoking elsewhere in the world.

The company, a unit of Altria Group Inc. and maker of Marlboro cigarettes, said late Sunday that it had agreed to buy a 40% stake in PT Hanjaya Mandala Sampoerna from its principal shareholders for a total of $2 billion in cash.

It will make a tender offer for the remaining stock at 10,600 rupiah ($1.13) apiece -- a 20% premium to Sampoerna’s closing price Thursday.

In all, the deal values the Indonesian company at $5 billion. Philip Morris also would assume about $160 million in debt.

Richmond, Va.-based Philip Morris’ bid highlights recent efforts to expand its presence overseas as government bans and increased awareness of the health risks of smoking have curbed tobacco use in mature markets: the U.S. and Europe.

“The market in the United States is not growing at the same rate it used to be. There are beginning to be smoking bans in Western Europe too,” said Argus Research’s Erin Smith. “Some of the less-developed countries don’t have that threat.”

Last year, Philip Morris’ domestic tobacco sales rose 3% to $17.51 billion; its international sales, on the other hand, billowed 18% to $39.54 billion.

An estimated 60% of males smoke in Indonesia -- the fifth- largest tobacco market behind China, the U.S., Russia and Japan -- and growing numbers of women are picking up the habit, some analysts said.

With the buyout of Sampoerna, Philip Morris would become Indonesia’s second-largest cigarette maker with more than a fifth of the market and would increase its global market share by close to 1 point, Altria Chairman and Chief Executive Louis C. Camilleri said during a conference call with analysts Monday.

In a separate matter, Altria’s Philip Morris USA division said Monday that it was awarded $173 million in damages after a U.S. District Court found that Switzerland-based Internet cigarette retailer Otamedia had infringed Philip Morris’ trademarks.

Altria shares rose 3 cents to $65.17 on the New York Stock Exchange.