Philip Morris International Inc.

March 13, 2005 20:10 ET

Philip Morris International Inc. -PMI- Announces Agreement to Purchase 40% Stake in PT HM Sampoerna Tbk, Indonesia's Third-Largest Tobacco Company


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: PHILIP MORRIS INTERNATIONAL INC.

MARCH 13, 2005 - 20:10 ET

Philip Morris International Inc. -PMI- Announces
Agreement to Purchase 40% Stake in PT HM Sampoerna
Tbk, Indonesia's Third-Largest Tobacco Company

JAKARTA, Indonesia--(CCNMatthews - Mar 13, 2005) -

Philip Morris International Inc. (PMI):

-- Public Tender Offer to be made for 100% of Remaining Shares at Rp.
10,600 per share (USD $1.13); a premium of 20%

-- Transaction Valued at Approximately Rp. 48 trillion (USD $5.2
Billion) including net debt of approximately Rp. 1.5 trillion (USD $160
Million)

Philip Morris International Inc. (PMI), the international tobacco
operating company of Altria Group, Inc. (NYSE:MO) today announced that
it has entered into agreements to acquire a 40% stake in Indonesian
kretek cigarette manufacturer, PT HM Sampoerna Tbk. (Sampoerna), from a
number of Sampoerna's principal shareholders, and will proceed to make a
public tender offer for 100% of the remaining shares at a price per
share of Rp. 10,600 (USD $1.13 per share), a premium of 20% over the
price of Rp. 8,850 (USD $0.95) on Thursday March 10, 2005.

Assuming that all shares are tendered, the transaction values Sampoerna
at approximately Rp. 48 trillion (USD $5.2 billion) including net debt
of approximately Rp. 1.5 trillion (USD $160 million). PMI said that it
will pay cash for all shares tendered and expects the transaction, when
completed, to be modestly accretive in 2005 to the diluted earnings per
share of Altria Group, Inc. The transaction will be debt financed
through a bank credit facility arranged for PMI and its subsidiaries.
The tender offer is expected to be completed within approximately 90
days and is subject to customary regulatory review.

Sampoerna is Indonesia's third-largest tobacco company, with estimated
domestic tobacco volume of 41 billion units in 2004, generating net
revenues of approximately Rp. 9.0 trillion (USD $1.0 billion). Its
operating income was estimated at approximately Rp. 3.1 trillion (USD
$360 million) in 2004, up 19.5% versus the prior year. Sampoerna has
strong kretek cigarette brands, including Dji Sam Soe and A Mild, and
held a 19.4% share of the market in 2004. Its shares are listed in
Indonesia on the Jakarta and Surabaya exchanges. Kreteks are cigarettes
made with tobacco and cloves, and represent 92% of the total Indonesian
cigarette market, which is estimated at more than 200 billion units
annually.

"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
Officer of PMI. "Today's announcement reflects our confidence in the
economic future of Indonesia and its tobacco industry, and positions us
for profitable future growth by partnering with a well-managed and
successful company that has an outstanding distribution and
manufacturing infrastructure."

"This is an excellent development for our shareholders and employees,"
said Putera Sampoerna, President Commissioner of Sampoerna. "PMI is well
known as a successful and responsible manufacturer and marketer of
quality tobacco products."

"We look forward to working with the employees of Sampoerna and are
especially pleased that Putera Sampoerna has agreed to serve as special
advisor to the board through the integration period and beyond," said
Matteo Pellegrini, President for the Asia Pacific region of PMI. "The
action we are taking today reflects our decision to enter the large and
profitable kretek cigarette segment in Indonesia. We intend to further
invest in Sampoerna's infrastructure and will continue to build the
brand equity of its strong and well-established brands. We have the
highest regard for Sampoerna, its employees and its strong heritage."

Highlights of the Transaction

PT Philip Morris Indonesia, an affiliate of PMI, has executed sale and
purchase agreements under which it will acquire a 40% stake in Sampoerna
at a price per share of Rp. 10,600 (USD $1.13), representing a total of
Rp. 18.6 trillion (USD $2.0 billion) from a number of Sampoerna's
principal shareholders. PT Philip Morris Indonesia will make a public
tender offer for 100% of the remaining issued and paid up shares of
Sampoerna. The tender offer process will be subject to applicable
Indonesian laws and regulations. The transaction values Sampoerna at
approximately Rp. 48 trillion (USD $5.2 billion), based on all shares
being purchased at a price per share of Rp. 10,600 (USD $1.13 per
share), an exchange rate of Rp. 9,365 per USD, and the assumption of
Sampoerna's net debt of approximately Rp. 1.5 trillion (USD $160
million). The tender price being offered is 20% higher than the closing
price of Sampoerna's shares on Thursday March 10, 2005.

Investor and Media Conference Call

A conference call with members of the investment community and media
will be Webcast from New York at 10:00 a.m. eastern time on March 14,
2005. Access is available at www.altria.com.

Financial and Legal Advisors

PMI's financial advisor for the transaction was Credit Suisse First
Boston. Legal counsel was provided by Clifford Chance LLP and Mochtar
Karuwin Komar.

Philip Morris International Inc.

Philip Morris International Inc., headquartered in Lausanne,
Switzerland, currently holds a 14.5% share of the international
cigarette market. Its brands, led by Marlboro and L&M, are manufactured
in more than 60 factories around the world and sold in over 160
countries. PMI is an operating company of Altria Group, Inc. More
information is available at www.philipmorrisinternational.com.



2004 Results
------------

Net revenues USD $ 39.5 billion

Operating companies income USD $ 6.6 billion

Unit volume 761.4 billion

Worldwide market share 14.5 %



PT HM Sampoerna Tbk.

PT HM Sampoerna Tbk. was founded in 1913 and today is Indonesia's
third-largest tobacco company with a 19.4% cigarette market share in
2004. Sampoerna's shares are listed on the Jakarta and Surabaya
exchanges. Sampoerna's market capitalization was approximately Rp. 35.7
trillion (USD $3.8 billion) as of the end of February, 2005. Its
principal activity is the manufacture and sale of kreteks, which are
cigarettes made with tobacco and cloves. Dji Sam Soe and A Mild are the
core brands in Sampoerna's premium portfolio, while Sampoerna A Hijau
competes in the medium price segment. Sampoerna operates three major
cigarette manufacturing facilities in Indonesia. Its main facility is
located in Pandaan, a central location between Surabaya and Malang in
East Java. The other two are in Surabaya and Malang.



2004 Estimated Results - Domestic Tobacco
-----------------------------------------

Net revenues Rp. 9.0 trillion USD $1.0 billion

Operating income Rp. 3.1 trillion USD $360 million

Unit volume 41 billion

Share of total Indonesian market 19.4 %

Source: PMI Estimates



Forward-Looking and Cautionary Statements

This press release contains projections of future results and other
forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995. The following
important factors could cause actual results and outcomes to differ
materially from those contained in such forward-looking statements.

Altria Group, Inc.'s consumer products subsidiaries are subject to
changing prices for raw materials; intense price competition; changes in
consumer preferences and demand for their products; fluctuations in
levels of customer inventories; the effects of foreign economies and
local economic and market conditions; and unfavorable currency
movements. Their results are dependent upon their continued ability to
promote brand equity successfully; to anticipate and respond to new
consumer trends; to develop new products and markets and to broaden
brand portfolios in order to compete effectively with lower-priced
products; to improve productivity; and to respond effectively to
changing prices for their raw materials.

Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA Inc. and
Philip Morris International Inc.) continue to be subject to litigation,
including risks associated with adverse jury and judicial
determinations, courts reaching conclusions at variance with the
company's understanding of applicable law, bonding requirements and the
absence of adequate appellate remedies to get timely relief from any of
the foregoing; price disparities and changes in price disparities
between premium and lowest-price brands; legislation, including actual
and potential excise tax increases; increasing marketing and regulatory
restrictions; the effects of price increases related to excise tax
increases and concluded tobacco litigation settlements on consumption
rates and consumer preferences within price segments; health concerns
relating to the use of tobacco products and exposure to environmental
tobacco smoke; governmental regulation; privately imposed smoking
restrictions; and governmental and grand jury investigations.

Altria Group, Inc.'s consumer products subsidiaries are subject to other
risks detailed from time to time in its publicly filed documents,
including its Quarterly Report on Form 10-Q for the period ended
September 30, 2004. Altria Group, Inc. cautions that the foregoing list
of important factors is not complete and does not undertake to update
any forward-looking statements that it may make.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    For Philip Morris International Inc.
    Media Inquiries:
    Jakarta - David Davies
    +6221-2553-9902
    or
    Investor and Media Inquiries:
    New York - Nicholas M. Rolli
    +1-917-663-3460
    or
    Lausanne - Press Office:
    +4121-618-4500