[Intl-tobacco] Japan Tobacco says to push for full privatisation (fwd)

[Robert Weissman]

Japan Tobacco says to push for full privatisation
by Miki Shimogori
Source: Reuters, Friday, 12/15/00

TOKYO, Dec 15 (Reuters) - Japan Tobacco Inc (JT), the world's
third-largest tobacco group, said on Friday it would seek full
privatisation, which it said is a must to brave heightened competition in
the global tobacco business.

The former state monopoly was privatised in 1985 but the law requires the
government to retain a two-thirds holding.

Ryosuke Tsuji, a general manager at JT's Corporate Communication Division,
said it has set up a task force to urge changes in the law to free it from
government control.

Tsuji said the regulation was viewed as a potential drag on JT, which
grabbed headlines last year when it announced a $7.8 billion takeover of
the international business of RJR Nabisco Holdings Corp, known for its
Camel and Winston brands.

``About 80 percent of realignment in the global tobacco industry,
excluding China, looks to be over. Unless we are allowed to tap equity
financing, we will be kept well behind powerful rivals in the race to seek
business opportunities in the remaining 20 percent and in China,'' said
Tsuji.

``We hope to ensure full privatisation of our company as early as
possible,'' he added.

JT holds a 75 percent share of Japan's tobacco market -- the world's
largest after China and the United States -- and has a powerful presence
in Asia with its flagship Mild Seven cigarettes. But it was little known
outside the region until the RJR International takeover.

JT's share of the global tobacco market, excluding China, now stands at
eight percent, less than half that of the world's biggest tobacco firm
Philip Morris (NYSE:MO - news) of the United States.

Its bid to be privatised comes just as the government is set to lower its
stakes in other former state monopolies such as telecoms giant Nippon
Telegraph and Telephone Corp (NTT) and Japan Railway (JR) companies.

Last week, the Ministry of Transport said the government would submit a
draft bill for full privatisation of three former state-owned railways ---
East Japan Railway Co , West Japan Railway Co and Central Japan Railway Co
-- to the next ordinary session of parliament.

The move comes at a time when global investors are leaning towards a
``free float'' standard in making investments -- stocks freely available
for investors.

Morgan Stanley Capital International (MSCI) said last weekend that it
would adjust the composition of its widely watched indices based on the
amount of stocks freely available for investors, and typically exclude
firms whose free-floating shares accounted for less than 15 percent of
capital.

MSCI's move, which will not be completely implemented until mid-2002,
could pose a threat to large-cap issues with low free float ratios such as
JT and NTT.

``We're concerned about the MSCI move,'' said Tsuji. ``Although the shares
are recovering in the short term, we are closely watching to see how
investors react to the decision.''

JT shares, viewed as a core defensive stock, ended Friday's session up
0.53 percent at 765,000 yen, up from a low of 686,000 on March 17 but
still less than half of their peak of 1.54 million marked in July last
year.

Analysts said the shares could remain weak for the rest of this year, due
partly to weak domestic tobacco sales, but that cost cutting benefits and
current comparatively low valuations compared to foreign peers may pave
the way for potential revaluation in the shares in the coming year.

Tsuji said JT's business performance is on the right track, adding that
the firm is likely to achieve its group net profit target of 35 billion
yen in the year ending next March