STOCKHOLM (Reuters) – Philip Morris Worldwide Inc has agreed to purchase tobacco and nicotine merchandise maker Swedish Match in a $16 billion deal that goals to chop the U.S. firm’s dependence on cigarettes.
In a guess on fast-growing markets for cigarette options, PMI stated on Wednesday it was making a money supply for the Stockholm-based group at 106 crowns per share, valuing it at 161.2 billion crowns ($16 billion). Swedish Match’s board has beneficial the supply.
Swedish Match shares have been up 9% to a document 103.45 crowns, having jumped already on Tuesday when PMI confirmed reviews it was in talks to purchase the agency.
Nonetheless, hedge fund Bronte Capital, which owns about 1% of Swedish Match, stated the supply value was “unacceptable”, reiterating its opposition to the takeover. Some 90% of shareholders must comply with the deal for it to proceed below Swedish legislation.
John Hempton, co-founder of Sydney-based Bronte Capital, stated he had been contacted by many shareholders opposing the deal both as a result of the worth was too low or as a result of they need the corporate to remain as it’s.
A Swedish Match spokesperson declined to remark. “Shareholders are free to make their very own selections and make their very own statements,” the spokesperson stated.
Philip Morris is probably the most lifelike purchaser for Swedish Match from a contest perspective, however could but must elevate its supply, Alastair Mankin, vp at brokerage Cowen, stated in a analysis notice.
“Perhaps goal shareholders will wish to agitate for a greater value than PM initially affords – however that would appear probably the most intuitive path to a value enchancment, relatively than the potential for a competing bid from a 3rd celebration,” Mankin stated.
The Swedish firm makes most of its revenue from Swedish-style moist snuff referred to as “snus”. Gross sales of its comparatively new Zyn tobacco-free nicotine pouches – which, like snus, are put below the higher lip and sucked – are rising quickly in Scandinavia and the USA as customers turn into extra health-conscious.
Swedish Match controls almost half the world’s share of each the nicotine pouch and snus markets. Additionally it is the fourth largest producer of U.S.-style moist snuff, a class that’s led by Altria, in keeping with Euromonitor.
Swedish Match dropped cigarettes in 1999 and needs to spin off its cigar enterprise, a transfer that may imply a full exit from flamable merchandise. PMI goals for smoke-free merchandise to account for greater than half of gross sales by 2025.
PMI was spun off from U.S. peer Altria, a rival to Swedish Match, in 2008. Swedish Match would give PMI, which doesn’t promote its merchandise in the USA, entry to a ready-made distribution community.
“This isn’t a price synergy case,” Swedish Match CEO Lars Dahlgren informed Reuters. “That is relatively a textbook instance of excellent industrial logic – two firms that share the identical imaginative and prescient and that are also very complementary of their business setups.”
Analysts at Credit score Suisse stated they’d a optimistic view on the bid worth, which represents roughly a 40% premium to Swedish Match shares previous to the bid announcement.
Swedish Match has lengthy been tipped as a takeover candidate.
(Graphi: Swedish Match dominates tobacco-free oral nicotine business Swedish Match dominates tobacco-free oral nicotine business: )
BofA Securities and Citigroup World Markets Restricted are performing as advisers to PMI on the deal. Goldman Sachs is advising Swedish Match, which additionally commissioned an opinion from SEB Company Finance.
Swedish Match reported first-quarterly earnings on Wednesday that have been barely beneath expectations, however gross sales and income from Zyn grew considerably in the USA, with deliveries up 35%.
($1 = 10.0381 Swedish crowns)
Reporting by Niklas Pollard and Anna Ringstrom; Extra reporting by Byron Kaye in Sydney, Marie Mannes and Helena Soderpalm; Enhancing by Louise Heavens, Edmund Blair, Jane Merriman and Jan Harvey
