JT acquires kretek firms

Japan Tobacco Inc. said today that the JT Group had signed an agreement to purchase all the outstanding shares of the Indonesian kretek company PT. Karyadibya Mahardhika (KDM), and its distributor, PT. Surya Mustika Nusantara (SMN), for US$677 million.

The transaction is expected to be completed during the fourth quarter of the 2017 fiscal year following regulatory clearance.

In setting out its reasons for the acquisition, JT said Indonesia’s cigarette market, which was the second largest, was dominated by kreteks, or ‘clove cigarettes’.

Currently, JT was involved mainly in the conventional cigarette business in Indonesia, it added, and the acquisition would give the group immediate scale and presence on a nationwide level in the kretek sector.

“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 JT Group’s 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 has nine kretek production facilities in Java and sells its products across Indonesia through SMN. The two companies employ about 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.”