Philip Morris' Sampoerna Sets Rights Issue Price at Rp. 77k
Philip Morris International Inc.’s PM shares gained 0.2% on Oct 1 after its Indonesian unit — PT HM Sampoerna Tbk (“Sampoerna”) — set the price of its rights offering at Rp. 77,000 for each rights share, which is at the higher limit of the price range of Rp. 65,000–Rp. 77,000 per rights share set by the company. The biggest rights offering in the country is aimed to meet the mandatory minimum free float requirement, per new Indonesian law.
The price set by Sampoerna is at a 1.349% premium to the closing price on the IDX of Rp. 75,975 on Sep 30, 2015. The total net proceeds to Sampoerna from the rights issue, approximately $1.4 billion (Rp. 14,657 = $1.00 as on Sep 30, 2015), will be used for general corporate and working capital purposes. Post Rights Issue, PT Philip Morris Indonesia (PMID) will own 92.50% of the issued and outstanding share capital of Sampoerna.
This rights issue was done to comply with the Indonesian Stock Exchange’s (“IDX”) mandatory requirement of a minimum threshold for public shareholding. According to a new rule, all listed companies are required to have at least 7.5% free float shares by Jan 2016 Sampoerna, which is 98.18% owned by Philip Morris through PMID, plans to sell as much as 269.7 million shares to raise the required amount. Reportedly, Philip Morris will increase the public hold in the company from 1.82% to 7.5% to comply with the new rule. Per Reuters, the tobacco maker has engaged The Goldman Sachs Group Inc. GS, Credit Suisse Group AG CS, JP Morgan and local firm, Mandiri Sekuritas, for the sale.
Philip Morris acquired Sampoerna in May 2005 while it was still a subsidiary of Altria Group Inc. MO. Sampoerna is a leading tobacco company in Indonesia where tobacco consumption is widespread. The company produces kretek-type clove cigarettes and owns the popular brand, Sampoerna 'A' Mild, a filter cigarette.
Philip Morris, a Zacks Rank #3 (Hold) stock, reported better-than-expected sales and profits in the first and second quarters of 2015. Earnings and revenues also increased 16% and 7%, respectively, year over year. Improved volumes, strong brand portfolio and product innovation drove the first-half results, making up for the unfavorable foreign currency translation impact. Given the strong start to the year and solid figures, management raised the fiscal 2015 earnings growth outlook twice in the first half of the year.
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