New York, Stockholm The US tobacco company Philip Morris International is expanding its range of smoke-free products and is taking over the smaller European competitor Swedish Match. Philip Morris is offering 106 crowns per share (10.30 euros) for the Swedish company, according to a statement on Wednesday. That’s 40 percent more than Monday’s closing price.
Both sides confirmed negotiations on Monday evening. Swedish Match shares rose nearly 25 percent to 95 kroner on Tuesday.
The company is valued at around $16 billion in the deal. Swedish Match’s Board of Directors recommends that shareholders accept the offer.
Philip Morris is best known internationally for its Marlboro brand. Due to the worldwide decline in cigarette consumption and the critical view of the health authorities on the market, the US group has been trying for years to increase the proportion of so-called smoke-free products. These include nicotine pouches, for which Swedish Match is well positioned. In 2021, smoke-free products accounted for almost two-thirds of sales.
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Swedish Match was founded in 1917. Initially, the company mainly manufactured matches. Tobacco products and lighters were added later. Meanwhile, Swedish Match has specialized in the production of nicotine pouches that are marketed under the name “Snus”. These are small, canned portions of tobacco that are placed between the upper lip and the roof of the mouth and release nicotine. These have been popular in Sweden and Norway for decades.
Successful nicotine pouches
The bags are only approved in Sweden within the EU. Several attempts to have “snus” approved in other EU countries have so far failed. On the home market, the group is also fighting against increasingly strong competitors.
The group is more successful in the USA. “Snus” has been permitted here since 2019. Swedish Match is now the market leader in smoke-free products, also thanks to the Zyn brand. The group has a market share of around 64 percent here.
The market for nicotine pouches and similar products is growing strongly and is highly competitive: the US group Altria, which separated its international business under the name Philip Morris in 2008, is also represented here with its “On” brand.
A takeover of Swedish Match by Philip Morris fits in with the US group’s strategy of expanding its range of smokeless and less harmful tobacco products in addition to the international distribution of cigarette brands such as Marlboro, Chesterfield and L&M.
For example, Philip Morris developed the “Iqos” system for heating tobacco and last year acquired the Vectura Group, a developer of asthma medicines. The group also acquired Fertin Pharma, a supplier of smoking cessation aids.
Experts have mixed feelings about the takeover. Jefferies analyst Owen Bennet praises the fact that the acquisition could strengthen Philip Morris’ US distribution network. This would put pressure on competitors Altria and British American Tobacco in particular.
Altria could then stop marketing “Iqos” in the U.S. and take over the “vape” company Juul, in which it already has a stake. “We wouldn’t rule out a counter-offer for Swedish Match either,” said Bennett, for example through Japan Tobacco.
Persistent addiction
Goldman Sachs analysts believe that a purchase of Swedish Match “offers attractive growth opportunities in the US and access to the US market for reduced-risk products.” JP Morgan experts are convinced that the acquisition could bring Philip Morris more quickly to its goal of achieving at least half of group sales from smoke-free products by 2025: the share of sales would then be 45 percent in 2025 instead of 42 percent, they write .
Other observers are more skeptical. “A $15 billion acquisition would not, in our view, be the best use of Philip Morris’ capital,” writes Bloomberg analyst Kenneth Shea. The acquisition would “further strengthen the company’s involvement in the controversial tobacco industry.” Actually, Philip Morris only announced in 2021 that it would expand more in the wellness and health sector.
Should the takeover succeed, Philip Morris must hope that the health authorities will not also focus more on the smoke-free side of the tobacco industry – for example due to the controversial questions of addiction and possible cancer risks. Swedish Match only gave up the planned spin-off of its US cigar business in March after a critical statement from the FDA.
Philip Morris was recently criticized after municipalities in several European countries, including Hungary and Greece, signed cooperation agreements with the group and proclaimed so-called “smoke-free cities and islands”. What sounds like health protection is actually used to market new nicotine products, warned the anti-corruption network OCCRP.
With agency material
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