US-Swiss company Philip Morris International (PMI) has agreed to buy Swedish Match, a world leader in snus, chewing tobacco and other smokeless tobacco products, for $16.1 billion. If Swedish Match’s shareholders and regulators approve the deal, PMI will be able to significantly expand its operations in the alternative tobacco market in the face of falling cigarette sales and anti-smoking authorities in many countries.
On Wednesday, May 11, the management of the Swedish company Swedish Match AB recommended that its shareholders accept a $16.1 billion purchase offer from US-Swiss tobacco giant Philip Morris International (PMI), whose most famous brand is Marlboro. The buyer offered a good premium for the shares of the Swedish company – 12% more than the closing price on May 10 after information about the negotiations got into the media, and the shares of Swedish Match began to rise in price, and 32% more than the average price for the last 30 days. According to US observers, the deal indicates that Philip Morris is serious about expanding its operations in the smokeless tobacco market in the face of falling cigarette sales.
Swedish Match AB traces its history back to 1915 from two companies – the state tobacco monopoly Svenska Tobaksmonopolet and the manufacturer of matches Svenska Tandsticks Aktiebolaget. For almost the entire 20th century, the company was actively engaged in the production of traditional tobacco products and non-smoking tobacco products typical for northern European countries – chewing and snuff tobacco, snus, etc. In 1992, the company acquired its current name Swedish Match (Swedish match) – as a tribute to the memory legendary invention. In addition, the world famous lighter brand Cricket is also part of Swedish Match AB.
Against the background of the gradual cessation of cigarette smoking among the population of developed countries, the Swedish company sold its foreign cigarette operations in 1999, keeping only the Swedish cigarette business and focusing on the development of smokeless tobacco products. In the 2000s, Swedish Match experimented with promoting snus in many markets, including Russia, India and South Africa, where it faced resistance from traditional tobacco giants. However, in recent years, the influence of the world’s tobacco giants has been seriously shaken due to the intensifying struggle of the authorities against smoking, the public trend to quit smoking, high-profile litigation and tightening control of regulators over the sale of cigarettes. This led to the fact that tobacco companies began to actively invest in alternative market segments – in tobacco heating systems, vapes, electronic cigarettes, etc.
So, at the end of 2018, Altria (the former Philip Morris Companies) bought 35% of the manufacturer of electronic cigarettes Juul for $12.8 billion. However, since then, the value of this share has decreased to $4.2 billion due to several lawsuits against Juul and scandals with electronic cigarettes in the United States – then they reported a series of diseases allegedly caused by vaping.
“From a strategic point of view, this deal (between Philip Morris International and Swedish Match.— Kommersant) means a lot,” Jefferies investment bank analysts quote Reuters. “It will allow PMI to take a leading position in the European smokeless tobacco market, and will also allow better development of its own reduced-risk products in the US market (RRP segment — reduced-risk products) “.