JTI in talks for the sale of Mighty Corp. for P45 billion

JAPAN Tobacco International (Philippines) Inc. (JTI) said it is in exclusive talks with Mighty Corp. for the sale of its tobacco manufacturing and distribution business worth P45 billion.

A statement issued by JTI on Thursday confirmed it is currently conducting discussions on the sale of the cigarette manufacturing and distribution business of Mighty Corp.

“We can confirm that we have entered into exclusive talks with Mighty Corp. on the sale of its cigarette manufacturing and distribution business and assets,” JTI said in a statement.

The JTI statement reiterated it has yet to sign an agreement with the homegrown-tobacco manufacturer.

The Department of Finance (DOF) has also confirmed it is studying the offer of Mighty Corp. to settle its tax liabilities amounting to P25 billion, which will cover the deficiency-excise and internal- revenue taxes of both the company and its shareholders.

Finance Secretary Carlos G. Dominguez III said on Wednesday the settlement offer of Mighty Corp. amounting to P25 billion is separate from the criminal charges that may still be filed in court by the Bureau of Internal Revenue (BIR) against the company.

“We are studying the offer,” Dominguez said.

A written settlement proposal sent by Mighty Corp. to Internal Revenue Commissioner Caesar R. Dulay, through a letter dated July 10, was also presented to the finance chief.

Mighty Corp. President and Director Oscar P. Barrientos signed the letter confirming “the company’s willingness to settle all such excise and tax issues and respectfully offer as settlement of the company’s shareholders’ and its officers’ liability in this regard the total sum of P25 billion.”

Under the signed letter of Barrientos, the settlement sum of P25 billion would be funded by means of an interim loan from JTI.

The sale of the company’s manufacturing, distribution business, assets and intellectual-property rights, “including those owned by the company Wong Chu King Holdings Inc. and other affiliates to JTI or any of its affiliates for a total purchase price of P45 billion exclusive of VAT [value-added tax].”

Based on its settlement offer, the total amount that Mighty Corp. would remit to the government includes P3.5 billion in deficiency-excise taxes on its cigarette products that are now the subject of the three tax cases pending before the Department of Justice (DOJ); and P21.5 billion representing the liabilities of the company and its shareholders for all internal-revenue taxes, including income tax from 2010 to 2016 and the tax period up to the closing of the proposed transaction with JTI, and all transaction taxes related to the agreement with JTI.

The initial payment of P3.5 billion will be paid by the company on or before July 20, while the balance of P21.5 billion will be paid on or after the closing of the proposed deal with JTI.

“A binding memorandum of agreement in relation to the proposed transaction with JTI will be concluded shortly and prior to July 20, 2017, subject to finalizing terms with JTI and JTI’s completing its due diligence,” the letter said.

Barrientos committed to retire the operations of Mighty Corp. following the conclusion of its deal with JTI. Attached to the letter sent to the finance chief was a certification issued by Ernesto Andrade, the corporate secretary of Mighty Corp., showing that the settlement offer was authorized by the company’s board of directors and designated Barrientos as the authorized representative of the tobacco company.

The three tax-evasion cases filed by the BIR cover the firm’s nonpayment of excise taxes due its cigarette products and use of counterfeit tax stamps on its cigarette packs, which correspond to excise taxes valued by the bureau at a combined P37.88 billion.