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By Neil Jerome Morales and Martinne Geller
MANILA/LONDON (Reuters) - Filipino-owned tobacco company Mighty Corp is in very preliminary talks with British American Tobacco (BAT) (L:BATS) about a possible distribution partnership, a Mighty executive said on Thursday, as BAT seeks to expand in Asia.
Mighty is the second-largest tobacco company in the Philippines behind PMFTC Inc, a joint venture between a local unit of Philip Morris International (N:PM) and local firm Fortune Tobacco Corp.
Speculation about discussions between Mighty and the maker of Lucky Strike and Dunhill cigarettes has been swirling for weeks and a Mighty executive told Reuters on Thursday the companies were in early talks.
"We are still in the courtship stage, preliminary stage," Oscar Barrientos, executive vice president of Mighty, said when asked if the company was in talks with BAT. He said he could not disclose details of the discussions.
BAT, the world's No. 2 tobacco company, is looking at several options including partnering with another company, its general manager for the Philippines told local website ABS-CBNnews.com this week, noting it was in talks with several groups and was in a "dating stage".
"Just like any business we are always looking for ways to continue growing and improving our operations in all the countries where we operate," said a BAT spokesman in London. "No decisions have been made regarding any plans in Philippines."
Mighty's Barrientos said the company, which was founded in 1945 by Filipino-Chinese businessman Wong Chu King, had also received offers from Singaporean firms, given a recent surge in its market share fuelled by the fact that its cigarettes are cheaper than international brands.
He said the company now controls about 12 percent of the local tobacco market worth 100 billion pesos (102.15 million pound), up from about 10 percent at the end of 2013 and 3 percent in 2012.
Mighty is under investigation by federal authorities following accusations of tax evasion, including by its larger rival PMFTC. Barrientos said the process was just an examination involving large taxpayers and that no case had been filed against it.
Kim Henares, commissioner for the Bureau of Internal Revenue, told Reuters she could not discuss ongoing investigations.
"Whatever needs to be done, we will do it. If there is a case to be filed, everyone will know it because it will be subject of a press release," Henares said.
"There can only be a tax case if we assess that there is a large discrepancy," Henares said, adding that a 30 percent discrepancy would be subject to a tax case. Companies with narrower shortfalls are notified and given a chance to settle their deficiencies.
(Reporting by Martinne Geller in London; Editing by David Holmes)