Pmpmi Intense Distribution

By Heneage Mitchell

Philip Morris Philippines Manufacturing Inc. (PMPMI) and Fortune Tobacco Corporation (FTC) entered into an agreement last February 25, 2010 to unite the domestic business operations of both companies into a new entity called PMFTC Inc. (PMFTC).

Unlike a merger where one of the parties is absorbed into the other entity, PMPMI and FTC continue to exist, with PMPMI continuing its export business and FTC maintaining its contract manufacturing obligations.

Prior to the creation of PMFTC, Philip Morris and Fortune each had their respective strengths in the domestic market. Philip Morris led the high-priced segment through its main brands such as Marlboro and Philip Morris, while Fortune's strength was in the low- and medium-price segments through its main brands Fortune, Champion, and Hope.PMFTC is an affiliate of Philip Morris International (PMI) and is engaged in the manufacture, sale and distribution of tobacco products in the Philippine domestic market.

PMFTC is jointly owned by PMPMI and FTC following a business combination where PMPMI and FTC transferred selected assets and liabilities in exchange for shares in the company, which is estimated to have a 93.4% share of the Philippine domestic market.

Meanwhile, PMPMI, also an affiliate of PMI, is engaged in the business of exporting tobacco products manufactured in the Philippines.

"The creation of the new company provides PMI with a great opportunity to significantly expand its business in the world's 12th largest cigarette market and ensures long-term success in this critical market," according to Chris Nelson, managing director of PMPMI and president of PMFTC. "The business combination allows both parties to take advantage of each other's strengths: PMI's global experience, specifically in marketing brands like Marlboro and Philip Morris, with Fortune's expertise in manufacturing and distributing local cigarette brands providing an excellent platform for future success.

While neither side will discuss the history and details of the business combination, the fact that the two companies have come to this agreement augurs well for the future success of PMFTC

"PMFTC is built on a very solid foundation provided by both companies," according to Nelson. "Both parties are pleased with the agreement and view the combination as an excellent development for both."

As each party holds an equal economic interest in PMFTC, profits will be distributed on a 50/50 basis. PMFTC will declare dividends to distribute all its earnings subject to local statutory, working capital and capital expenditure requirements.

The board of directors of PMFTC has 11 members, 6 from PMI and 5 from FTC. The new company's management team includes executives from both companies, with Chris Nelson as president and

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