Japan Tobacco unit seeks approval for Mighty deal

If cleared, the transaction will officially be a done deal by next month and the government would likely receive by August the rest of the settlement offered by Mighty for its tax liabilities.
The cigarette firm offered 25 billion pesos (Bt16.5 billion) but the amount was expected to reach 30 billion pesos, inclusive of taxes. It earlier paid 3.44 billion pesos. Philippine Competition Commission chair Arsenio Balisacan said that Japan Tobacco International Philippines last Monday submitted its notification to the PCC for the planned 45-billion-peso acquisition of Bulacan-based Mighty.
Under antitrust law, all mergers and acquisitions worth 1 billion pesos and above must be approved by the PCC.
“Notifications are reviewed by our mergers and acquisitions office (MAO) for sufficiency. 
“If the submission is complete or the parties have fully complied with all the notification requirements, the review will proceed to phase one, which will not take more than 30 days. 
“If the MAO does not see any concern, it will recommend that the transaction be cleared,” Balisacan said.
However, if the MAO finds a concern, “it will continue with its review for a maximum period of 60 days”.
Ultimately, the PCC will decide based on the MAO’s recommendations, he said.
Last Monday, Finance Secretary Carlos Dominguez III said “the government’s full collection of Mighty’s civil settlement of its tax liabilities will depend on how swiftly the PCC can approve the sale of the home-grown cigarette company’s assets to JTI”.
In his state-of-the-nation address last Monday, President Rodrigo Duterte ordered the DOF and the BIR to accept Mighty’s settlement offer of 25 billion pesos.
Mighty is the second biggest cigarette manufacturer in the country after PMFTC Inc, the joint venture of tycoon Lucio Tan and global giant Philip Morris International.
“This will be the biggest tax settlement on record. It will produce a windfall for government, which is significant, since we face the unexpected costs of rebuilding Marawi and Ormoc,” Duterte said.
But the president said, “the acceptance of the tax settlement offer does not preclude other criminal charges against the company that the BIR may decide to file”.
The government decided to settle with Mighty as it wanted “to avoid a long court battle that, as we saw in previous cases, could take years to resolve,” he said. The BIR had filed in the Justice Department three tax evasion cases against Mighty and its top executives for a total of 37.9 billion pesos in unpaid excise taxes due to alleged use of fake tax stamps.
The tax settlement amount will be funded by the sale of Mighty’s assets and distribution network to JTI Philippines.
Last week, the DOF through the BIR accepted an initial 3.44-billion-peso payment from Mighty and JTI.