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Altria unit to buy stake in Asian cigarette maker

/ Source: The Associated Press

Altria Group Inc.'s Phillip Morris International division has agreed to acquire a 40 percent stake in Indonesia's third-largest cigarette producer, boosting its market share in the heavy smoking country as revenues elsewhere in the world shrink on health concerns.

The deal for PT Hanjaya Mandala Sampoerna is worth 48 trillion rupiah ($5.2 billion), the company's PT Philip Morris Indonesia unit said in a statement. It said it had agreed to buy 40 percent stake in Sampoerna, and would make a public tender offer for the remaining shares.

New York-based Altria Group's domestic and international tobacco businesses make it the world's biggest commercial tobacco company.

"Our investment in Sampoerna is a great opportunity to significantly expand our business in the world's fifth-largest and growing cigarette market," said Andre Calantzopoulos, president and chief executive of Phillip Morris International.

"Today's announcement reflects our confidence in the economic future of Indonesia and its tobacco industry," he added.

The takeover bid highlights the firm's efforts to expand its presence in foreign markets, where cigarette sales are growing as health concerns shrink revenues in developed countries in Europe and North America.

Up to 70 percent of Indonesian males smoke, and increasing numbers of women in the country of 220 million people are taking up the habit.

Sampoerna, which produces clove cigarettes called kreteks, had a 19.4 percent local market share in 2004. Sales of kreteks represent 92 percent of the total Indonesian cigarette market, which is around 200 billion cigarettes annually.