Philip Morris International Inc. (NYSE:PM) is set to buy a 49 percent stake in Arab Investors-TA for $625 million. The acquisition would bolster the cigarette major’s presence in the emerging markets.
25 Percent Interest In The Joint Venture
As a result of the proposed deal, Philip Morris International Inc. (NYSE:PM) would get nearly 25 percent interest in the Societe des Tabacs Algero-Emiratie, a joint venture between Arab Investors-TA and Algerian state-owned Societe Nationale des Tabacs et Allumettes SpA.
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Philip Morris International Inc. (NYSE:PM) sells brands including Marlboro overseas. The Société des Tabacs Algéro-Emiratie makes and distributes Philip Morris’ Marlboro and L&M brands under a license.
Joint Venture Since 2005
The world’s largest publicly traded tobacco company has had a partnership relationship with the joint venture since 2005. The joint venture manufactures and distributes under license Philip Morris’ Marlboro and L&M brands. These brands hold a substantial share of the international brands sold in Algeria, catapulting Philip Morris’ brands to the second position.
Philip Morris’ Presence In Algerian Market
Philip Morris International Inc. (NYSE:PM) has been seeking to enhance its presence in emerging markets as cigarette sales volumes continue to dwindle in many developed countries.
To counter the dwindling sales, during May, the maker of Marlboro and L&M brand cigarettes agreed to buy Grupco Carso SAB’s 20 percent stake in its Mexico tobacco business for about $700 million. This would give Philip Morris complete ownership of its Mexican unit.
Philip Morris International Inc. (NYSE:PM) views Algeria as a key region for possible future growth.
Philip Morris’ Eastern Europe, Middle East and Africa region and PMI duty free business’ President Miroslaw Zielinski exuded confidence on the proposed deal. He indicated that with the fourth-largest total gross domestic product in Africa and an estimated cigarette market of 30 billion units, Algeria holds tremendous potential for future growth.
Recently, the tobacco maker has had to confront several challenges. For instance, it reported lower second quarter earnings that were below analysts’ expectations owing to the recent currency headwinds.
Last month, the World Health Organization chief accused Philip Morris of seeking to ‘sabotage’ a proposed EU measure to clamp down on the tobacco industry marketing aimed at women and youngsters.
However, the proposed deal to acquire Arab Investors-TA is expected to add to Philip Morris International Inc. (NYSE:PM)’s per-share earnings next year.