Philip Morris, Dhaka Tobacco strike deal to produce Marlboro locally

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Shakhawat Hossain
The Dhaka Tobacco has struck a deal with the Philip Morris International (PMI) to produce and market the globally reputed Marlboro cigarettes in Bangladesh.
"We have signed a deal with the Philip Morris," said managing director Bashir Uddin of Dhaka Tobacco that paid more than Tk 10 billion worth of tax to government coffer in calendar year 2006.
The deal will help the Dhaka Tobacco, a subsidiary of the Akij Group, to produce and market product of the US-based PMI, the top global cigarette manufacturer with US$4.8 billion pre-tax profits alone in the US market in 2006.
The Dhaka Tobacco MD refused to disclose the details of the deal under which it will mainly manufacture and market Marlboro, PMI's flagship brand and the second most popular global product after Coke.
To secure the right to manufacture and market Marlboro in Bangladesh, the Dhaka Tobacco might have transferred a part of its ownership to the PMI, sources said.
The amount of money involved in the deal could be worth several hundred million dollar. This could be the biggest corporate deal in the country's history, sources added. However, the MD of Dhaka Tobacco, when asked by the FE, refused to comment on the transfer of share, but said the local company still held major part of the shares.
Earlier, Singapore based Singtel acquired more than 40 per cent shares of CityCell at a cost of more than $100 million and Orascom of Egypt took over majority shares of Seba Telecom at $40 million.
Tobacco experts pointed out that company like PMI did not give manufacturing and marketing licence for its products to any company without owning a part of the shares of the latter.
In Malaysia, Indonesia and most recently in Pakistan, PMI took over local companies or formed a joint-ventures to market its products, said an expert.
PMI in January last acquired an additional 50.21 per cent stake in Pakistan cigarette manufacturer, Lakson Tobacco Company Limited, from a number of Lakson Tobacco's principal shareholders for $ 10.96 per share to bring PMI's stake in Lakson Tobacco to approximately 90 per cent.
Five officials include president Matteo Pellegrini, vice-president (human resources) Michael Murphy and vice-president (finance) Douglas Werth of PMI based in Hong Kong arrived in the capital last Wednesday.
The deal was singed Thursday at a local hotel.
According to a PMI press release, Pellegrini said: "We are delighted to have Akij Group as our business partner in this important market. This agreement will benefit both companies and I am confident that our cooperation will support the success of Marlboro in Bangladesh going forward."
Local tobacco giant, Dhaka Tobacco, that holds 40 per cent shares of the local market worth more than Tk 50.00 billion now manufactures mid and lower segment cigarettes.
The negotiations between PMI and Dhaka Tobacco on manufacturing and marketing Marlboro was started several years back, Akij Group officials said.
The negotiation was fruitless during the lifetime of the group's founder chairman late Sheikh Akij Uddin who was against of selling any share of Dhaka Tobacco, the group's flagship company, they added.
Sheikh Akij Uddin died last year.