Philip Morris signs $372M Krakow deal
Privatization Minister Wieslaw Kaczmarek called the Philip Morris-ZPTK deal "the largest capital transaction in the five-year history of Polish privatization."
Philip Morris in Europe will pay $227 million for a 33% share of ZPTK. It will receive a 32% portion after investing an additional $145 million over three years.
The deal gives Philip Morris and ZPTK products a 36% share of the Polish cigarette market.
Andreas Gembler, president of Philip Morris Europe's EEMA Region, said Tuesday's announcement culminates 25 years of cooperation between Philip Morris and ZPTK. "It's the biggest American investment ever announced in Poland," he said.
"Poland today has one of the most dynamic economies in Europe. Our confidence in Poland's long-term growth is the main reason for this investment."
From ZPTK's point of view, the agreement will benefit the employees, local tobacco growers and the Krakow region, said Tadeusz Magier, president of ZPTK.
Philip Morris' $145 million investment in ZPTK will be spent on facilities, marketing, training, employment conditions and tobacco grower support.
The modernization of facilities is aimed primarily at factories, Gembler said, while the training will concentrate on ZPTK management.
"We would like to see this company run by Poles in the future and as soon as we can," Gembler said.
As for the employees, Philip Morris agreed not to layoff workers in the first two years, followed by a 7% staff reduction in the third year, ZPTK's Magier said. The agreement also promises a 30% wage increase.
In addition, of ZPTK's 35% remaining stock, employees and tobacco growers will be offered a 15% share each in the company and the remaining 5% will belong to the government as "privatization reserve," Kaczmarek said.
The agreement stipulates that growers in Poland will supply 45% of the tobacco used in production - 19,000 tons of tobacco in the next three years, Magier said.
Polish tobacco growers can also expect to see improvements in technology, such as help in upgrading tobacco quality. Gembler said Philip Morris would like to see more "American blend" tobacco grown in Poland, a type being sought more by consumers.
Kaczmarek discounted any influence the recent political turmoil might have had in hastening the deal. "We've been involved in this transaction for a very long time," he said, adding that the agreement's timing and the political upheaval were coincidental.
ZPTK has four factories and employs 4,000 people. It produces more than 35 billion cigarettes, including its leading brands Klubowe and Caro. Since 1973, ZPTK has produced Marlboro and L&M brands for the Polish market.
Philip Morris, based in New York, had revenues exceeding $65 billion in 1994. In addition to tobacco, Philip Morris has holdings in the food, beer, financial services and real estate sectors.
Another tobacco privatization agreement between Poznan and Reemtsma was expected this week. State officials would not confirm the outcome of that deal during the Philip Morris-ZPTK announcement. Last year, two Polish tobacco producers were privatized. Britain's British-American Tobacco Industries purchased a 33% stake in the Augustow plant for $88 million, and France's Seita bought a 33% share in the Radom plant for $64 million.
Philip Morris in Europe will pay $227 million for a 33% share of ZPTK. It will receive a 32% portion after investing an additional $145 million over three years.
The deal gives Philip Morris and ZPTK products a 36% share of the Polish cigarette market.
Andreas Gembler, president of Philip Morris Europe's EEMA Region, said Tuesday's announcement culminates 25 years of cooperation between Philip Morris and ZPTK. "It's the biggest American investment ever announced in Poland," he said.
"Poland today has one of the most dynamic economies in Europe. Our confidence in Poland's long-term growth is the main reason for this investment."
From ZPTK's point of view, the agreement will benefit the employees, local tobacco growers and the Krakow region, said Tadeusz Magier, president of ZPTK.
Philip Morris' $145 million investment in ZPTK will be spent on facilities, marketing, training, employment conditions and tobacco grower support.
The modernization of facilities is aimed primarily at factories, Gembler said, while the training will concentrate on ZPTK management.
"We would like to see this company run by Poles in the future and as soon as we can," Gembler said.
As for the employees, Philip Morris agreed not to layoff workers in the first two years, followed by a 7% staff reduction in the third year, ZPTK's Magier said. The agreement also promises a 30% wage increase.
In addition, of ZPTK's 35% remaining stock, employees and tobacco growers will be offered a 15% share each in the company and the remaining 5% will belong to the government as "privatization reserve," Kaczmarek said.
The agreement stipulates that growers in Poland will supply 45% of the tobacco used in production - 19,000 tons of tobacco in the next three years, Magier said.
Polish tobacco growers can also expect to see improvements in technology, such as help in upgrading tobacco quality. Gembler said Philip Morris would like to see more "American blend" tobacco grown in Poland, a type being sought more by consumers.
Kaczmarek discounted any influence the recent political turmoil might have had in hastening the deal. "We've been involved in this transaction for a very long time," he said, adding that the agreement's timing and the political upheaval were coincidental.
ZPTK has four factories and employs 4,000 people. It produces more than 35 billion cigarettes, including its leading brands Klubowe and Caro. Since 1973, ZPTK has produced Marlboro and L&M brands for the Polish market.
Philip Morris, based in New York, had revenues exceeding $65 billion in 1994. In addition to tobacco, Philip Morris has holdings in the food, beer, financial services and real estate sectors.
Another tobacco privatization agreement between Poznan and Reemtsma was expected this week. State officials would not confirm the outcome of that deal during the Philip Morris-ZPTK announcement. Last year, two Polish tobacco producers were privatized. Britain's British-American Tobacco Industries purchased a 33% stake in the Augustow plant for $88 million, and France's Seita bought a 33% share in the Radom plant for $64 million.
