Japan Tobacco Inc. (JT) (TSE: 2914) announced today that the JT Group has signed an agreement to purchase 100% of the outstanding shares of PT. Karyadibya Mahardhika (“KDM”), a kretek cigarette company, and its distributor, PT. Surya Mustika Nusantara (“SMN”), for USD 677 million.
The transaction is expected to be completed in the fourth quarter of the fiscal year 2017 following regulatory clearance.
1. Purpose for the Acquisition
Indonesia is the world second largest tobacco market mainly composed of kretek cigarettes, which are made of tobacco and cloves and are either machine-made or hand-rolled.
The JT Group is mainly involved in the conventional cigarette business in Indonesia. This deal will give the JT Group immediate scale and presence on a nationwide level in the
Indonesian kretek market.
“We are excited to enter the Indonesian kretek market nationwide by leveraging KDM’s supply chain, including procurement and production, as well as SMN’s broad-scale distribution network,” said Mutsuo Iwai, Executive Vice President and President of the Tobacco Business. “This will be an important expansion of our geographic footprint in emerging markets for our future sustainable growth. Notably, this is our first significant acquisition in South-East Asia and an excellent opportunity for us to further develop our business in a thriving region.”
KDM operates through nine production facilities of kretek cigarettes in Java and sells its products across Indonesia through SMN. The two entities employ around 7,500 people.
“I am confident that KDM’s excellent kretek products and local expertise and SMN’s strong distribution platform, together with JTI’s international know-how, will further strengthen our growth in Indonesia,” said Eddy Pirard, JTI’s President and CEO. “We look forward to welcoming all employees into our organization.” [...]