Philip Morris International, an American tobacco company, announced Tuesday that Colombian authorites rejected their $452 million bid to purchase Protabaco, Colombia’s second largest tobacco company, reports The Wall Street Journal.
According to Colombia’s Superintendent of Industry and Trade, who rejected the bid, the purchase of Protabaco would give Philip Morris, which in 2006 purchased Colombia’s largest cigarette company, Coltabaco, for more than $300 million, an 80% control of the tobacco market in the country.
The purchase, the Superintendent explained, “Would provoke a negative effect on consumers, who would be exposed to possible price increases and fewer alternatives in a market where one competitor would control a wider portfolio of brands and flavors.”
Philip Morris expressed its disappointment at the decision.
“We are obviously disappointed with this initial decision but the process is continuing and Philip Morris International is committed to working with the Superintendent of Industry and Commerce to address its concerns and we remain hopeful we can successfully complete the acquisition of Protabaco,” said James Mortensen, the company’s president for Latin America and Canada.
According to Mortensen, the company plans to file an appeal with Colombian authorities, and argued that they are “the best partner for Protabaco, its workers, Colombian growers, and the community in general.”
Philip Morris initially announced its plan to purchase Protabaco in July of 2009, and said that they expected the deal to take about six months to complete.
In 2008, Protabaco, whose brands include Mustang, Premier and President, sold more than six billion cigarettes in Colombia, earning it a 32% market share, and revenues exceeding $100 million.
This is not the first time that Philip Morris has run into problems with Colombian authorities. In June 2009, the company paid out $200 million after being sued by Colombia’s 32 departmental governments for tax evasion.
The departments had sued Philip Morris because the tobacco company allegedly had encouraged the smuggling of cheap cigarettes from Caribbean islands Curaçao and Aruba to avoid paying taxes in Colombia.