PT BAT Indonesia on Tuesday said it would merge with PT Bentoel Internasional Investama after taking nearly a 100 percent stake in the company earlier this year.
A unit of London-based giant, British American Tobacco, BAT Indonesia is looking to expand its business in a country where market penetration is high and the sale of tobacco faces few curbs. President director Rehan Baig described the merger as a “significant milestone” for BAT Indonesia and Bentoel.
BAT Indonesia holds a 99.74 percent stake in Bentoel, which sells the Star Mild brand of kretek , or clove cigarettes. It bought 85 percent of Bentoel shares in June for $494 million. A tender offer in August led to the greater stake.
BAT owns about 79 percent of BAT Indonesia.
A strategic analysis was conducted after the tender offer for Bentoel, aimed at creating synergy between Bentoel and BAT Indonesia. The senior management of both companies agreed a merger was the best option to take advantage of the strengths of the two companies.
“This merger is expected to form a single, stronger cigarette company in Indonesia that can compete and develop even better in Indonesia’s increasingly competitive cigarette industry,” said Bentoel president director Nicolaas B Tirtadinata. “The merger plan is also expected to offer benefits for shareholders of the two merging companies.”
Under the plan, BAT Indonesia shares would be exchanged with Bentoel shares at a ratio of one BAT Indonesia share for 7.68 Bentoel shares.
Jeremy Pike, previously BAT’s director for sub-Saharan Africa, will serve as president of the new company.
Previously from BAT Indonesia, Djoko Moeljono will serve as chief commissioner.
The merger must be approved by shareholders and regulatory authorities. It is expected to be completed in January.