JTI-Mighty buyout talks drive up LT Group stocks

MANILA, Philippines - Shares of LT Group Inc. (LTG), the holding company of taipan Lucio Tan, rallied for the second straight day yesterday following the Department of Finance’s announcement that Japan Tobacco Inc. (JTI) is in talks to buy embattled cigarette company Mighty Corp. for P45 billion.

LTG subsidiary Fortune Tobacco Corp. and US tobacco giant Philip Morris Manufacturing Inc. are partners in PMFTC Inc., the country’s biggest tobacco player with a 71 percent market share.

During yesterday’s session, LTG shares closed at P17.88 per share, up 7.45 percent after reaching a high of P18 per share. On Thursday, the shares likewise went up and closed at P16.64 per share, up 6.94 percent after reaching a high of P16.90 per share.

Traders said the acquisition of JTI, if it pushes through, would level the playing field in the cigarette industry because as a multinational company, JTI is seen adhering to proper regulatory measures and business practices.

“The industry will be better with fair competition and the playing field is level. LTG will definitely benefit from it,” said Astro del Castillo, managing director at First Grade Finance Inc.

For years, PMFTC, which previously had a 90 percent share of the cigarette market, had been struggling with illicit trade in the industry including the alleged use of fake cigarette stamps by Mighty.

Mighty is the Bulacan-based cigarette company owned by the Wongchuking family. It has been at the center of a multibillion peso cigarette tax stamps issue after authorities raided several of its warehouses since late last year for alleged use of fake tax stamps.

The company has denied using and selling cigarettes with fake tax stamps but authorities such as the Bureau of Internal Revenue (BIR) has slapped tax evasion charges against the company.

The Bureau of Customs (BOC) likewise suspended the import accreditation of Mighty, effectively paralyzing its operations.

On Wednesday, the Department of Finance said JTI has offered to buy Mighty for P45 billion, part of which the company would use to settle its tax obligations to the government.

Industry sources said Mighty and JTI have been in talks since May after the Japan-based company decided to beat by P10 billion the offer of British American Tobacco (BAT), which was also interested in acquiring Mighty.

The STAR earlier reported that BAT was working with retail tycoon Lucio Co to acquire Mighty. Co, who also has a liquor business, who has previously expressed interest in investing in the Bulacan-based company.

Mighty president Oscar Barrientos confirmed to The STAR that they are no longer in talks with BAT after Mighty received a better offer from JTI.

Sources said separately that the government preferred JTI’s offer because it would provide bigger elbow room for Mighty to pay its tax deficiencies of P25 billion.