Altria Expands Presence in Indonesia

Altria Group Inc. will pay about $4.9 billion to take control of Indonesia’s third-largest cigarette maker, expanding in a market of 141 million smokers.

Philip Morris International, a unit of New York-based Altria, in March paid 18.6 trillion rupiah ($2 billion) for 40% of H.M. Sampoerna, and raised its stake to about 98% through a tender that ended Wednesday, said Andi Sidharta, an investment banker at Jakarta-based Bahana Securities, which arranged the offer.

Tobacco companies including Philip Morris, maker of Marlboro cigarettes, and British American Tobacco are expanding in countries such as China and Indonesia as rising taxes and health concerns cut the number of smokers in the U.S. and Western Europe. The purchase of Surabaya, East Java-based Sampoerna is the biggest in Indonesia by an overseas investor.

“Indonesia is a much better market, with tobacco volume sales growing by 3% to 5% annually,” said Cholis Baidowi, who helps manage $1.15 billion of Indonesian assets at Trimegah Securities in Jakarta. “This compares with negative growth in the U.S.”

Philip Morris’ international cigarette shipments climbed 3.5% in 2004, while shipments declined 0.1% in the U.S., where consumption is declining and some smokers have switched to discount brands.