Philip Morris International (PMI), the maker of Marlboro cigarettes, announced that it has struck a deal to acquire Stockholm-based Swedish Match for $16 billion. The company’s move represents a huge bet in the growing market for alternatives to cigarettes. Swedish Match is a leader in the production of so-called snus, or nicotine packets, which originated in the Scandinavian market but are becoming increasingly popular abroad. PMI targets smokeless products to reach a 50% share by 2025, up from about a third now, the Financial Times reports.
The Swedish company also owns Zyn, the largest nicotine packet brand in the US. That makes it even more desirable than PMI, as the cigarette maker has failed to achieve a significant presence in the U.S. market for more than a decade. The main reason PMI bought Swedish Match was precisely the opportunity to expand in the US, according to Jonathan Fell of investment house Ash Park Capital, which is a shareholder in the company. Swedish Match’s snus sales in the US and Scandinavia grew by more than 50% last year.
Under the terms of the deal, PMI will pay $10.57 per share to Swedish Match. That translates into a 39% premium to the closing price on May 9, before negotiations between the companies went public. Swedish Match’s shares have risen more than 35% since the start of the week and now exceed SEK 103 ($10.29).
Swedish Match’s board has recommended that its shareholders accept the offer and stated that the offer reflects Swedish Match’s long-term growth prospects, taking into account the risks to their realisation. The company has net debt of approximately USD 1.3 billion. Swedish Match and PMI have collaborated in the past, including through a 2009 joint venture designed to promote Swedish snus and smokeless tobacco products worldwide.
The Buyer does not plan any “material changes” to Swedish Match’s operating facilities or to the employment relationships of its management and employees.
PMI traces its origins back to 2008, when US-based Altria spun off its international business. PMI has the most aggressive approach among traditional cigarette companies in trying to gain market share in so-called new-generation products such as vapes and tobacco heating devices. Its willingness to transform its business model and support anti-smoking efforts, including backing the idea of banning cigarettes within 10 years, has proved controversial following its £1bn deal to acquire Vectura, a British asthma inhaler company.
