Phillip Morris International (PMI) acquisition of PT HM Sampoerna Tbk.

Asdi Kurniawan Toba 11/321553/EK/18714

PT Hanjaya Mandala Sampoerna Tbk. is Indonesian tobacco company founded by Liem Seeng Tee in 1930s. The name itself comes from the word sampoerna, means perfection. The company was started as a home-based family business in Surabaya, East Java, Indonesia and made a big shot in the market, as they were the first tobacco company in Indonesia who produced a clove cigarette. In the row with the companys big success, it kept growing and finally the business was moved to an abandoned building and then renovated. In 2003, PT HM Sampoerna Tbk. held the third position for biggest cigarette company in Indonesia and was in queue behind Gudang garam and Djarum with generating revenues around Rp 9.0 Trillion and producing 41 billion units of tobacco volume in 2004. With an increase of 19.5% operating income from the previous year (2003), in 2004 its operating income was approximately Rp 3.1 trillion, made Sampoerna Tbk. hold 19.7 percent of Indonesias cigarette market. This achievement attracted one of the worlds biggest tobacco companies, a white cigarette producer, Phillip Morris International Inc. (PMI). It has been more than 20 years since the first time the company operated in Indonesia and at 2005, it held for below 9 percent of Indonesias total tobacco market that counted from selling 50% of the white cigarette market in Indonesia. On 14 March 2005, using its affiliation company, PT Phillip Morris Indonesia, the america-based tobacco company finally announced the acquisition of PT HM Sampoerna Tbk, company that based on the 3rd largest city in Indonesia, Surabaya. But the settlement of the acquisition was held on 4 days later, 18 March 2005. With the acquisition fee of approximately Rp 48 Trillion including the net debt around Rp 1.5 T , the ownership finally moved out from the familyowned to Phillip Morris International Inc. The transaction was debt financed using a bank credit facility arranged for PMI and its subsidiaries. The acquisition was a surprise for some people as the previously family business oriented, PT HM Sampoerna Tbk. was performing and growing really good. In addition, At that time the company was not really showing a sign for sell. Furthermore, by buying PT HM Sampoerna Tbk., means that Phillip Morris which was exclusively producing the white cigarettes had to enter the new cigarette market that they had never been before.