Peer pressure

31 July 2015 By Una Galani Follow @ugalani

The tobacco giant must lift the free float of its Indonesian unit. The potential $1.5 billion sell-down comes as an economic slowdown hits cigarette sales. Luckily for the Marlboro man, investors can hardly ignore a share sale by the country’s largest listed group.

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New York-listed Philip Morris International said on June 26 it was exploring options for its Indonesian subsidiary to comply with a local rule that requires listed companies to have a minimum 7.5 percent free float by January 30, 2016.

The tobacco giant said its Hanjaya Mandala Sampoerna unit had hired investment banks to explore options, including potential capital market transactions. Sampoerna, Indonesia’s largest tobacco company, is 98.18 percent owned by Philip Morris.

The U.S. buyer acquired the Indonesian business in 2005 in a two-part deal valuing the entire company at 48 trillion rupiah, which is worth $3.6 billion at current exchange rates.

Sampoerna makes clove cigarettes, known locally as kretek, under the brands A Mild, Sampoerna Kretek, and Dji Sam Soe and varieties of Marlboro, the world’s best-selling cigarette brand.

Sampoerna’s thinly traded shares have risen 19 percent since Philip Morris’s announcement. As of July 30’s close, it had a market capitalization of 362 trillion rupiah.

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