Philip Morris International to appeal Colombia's rejection of proposed Protabaco acquisition..

June 16, 2010 - Philip Morris International Inc. (PMI) plans to appeal a Colombian regulator's decision to deny its $452 million bid to acquire privately owned cigarette maker Productora Tabacalera de Colombia, or Protabaco.

Background: Back on Friday, July 10, 2009 PMI said it would pay $452 million to buy privately owned Protabaco, a Colombian cigarette maker expanding its presence in the South American continent. (Protabaco manufactures and sells cigarettes, cigarillos and cigars either in our own brands or private label.)

Protabaco is the second largest tobacco company in Columbia with about 32-percent market share and registered a turnover of around $108 million in 2008. The company has three cigarette plants in Columbia and its leading brands are Mustang, Premier and President.

The purchase of Protabaco needs regulatory approval and is expected to be completed within six months, New York-based PMI said on July 10th.

PMI to buy Columbia cigarette maker - Protabaco..
As PMI looked to expand in Latin America, it was disclosed Tuesday, June 15th in a filing with the Securities and Exchange Commission that the Colombian competition authority didn't approve the acquisition and said it would seek to commence a reconsideration process.

The Colombian antitrust watchdog said the acquisition would hamper competition in the local market. The merged company would control almost 80% of the Colombian cigarette market, the watchdog said in a statement Tuesday, June 15th. The acquisition would erect obstacles for the entry of new competitors in a shrinking market, the regulator added. "These circumstances would provoke a negative effect on consumers, who would be exposed to possible price increases and fewer alternatives in a market where one competitor would control a wider portfolio of brands and flavors," the regulator said.

The regulator said after a merger, PMI would become almost the sole buyer of tobacco leaves and would be able to impose purchase conditions on tobacco growers.

In 2005 and 2006, Philip Morris acquired Colombia's largest cigarette maker, Coltabaco, for a little more than $300 million.

Reference: UPDATE: Philip Morris To Appeal Rejection Of Colombia Takeover by Inti Landauro, Dow Jones Newswires, The Wall Street Journal, 6/15/2010.