According to the Wall Street Journal, Bloomberg and the financial times, international tobacco giant Philip Morris International Inc. is negotiating the acquisition of smokeless tobacco product manufacturer Swedish match, which will accelerate the development of the Marlboro manufacturer beyond cigarettes.
Swedish Match and Philip Morris International confirmed their discussions in a statement on Monday, saying that negotiations were ongoing and it was uncertain whether they would make an offer. If the deal is concluded, it will become one of the largest transatlantic deals this year.
Discussions are under way and an agreement may be announced in the next few days, according to people familiar with the matter. As the details have not been made public, people familiar with the matter asked not to be named.
According to Bloomberg analyst Kenneth Shea, the market valuation of match in Sweden is about $11.5 billion, and if a deal is reached, the company could be valued at $15 billion.
The Financial Times reported that the purchase price was $16 billion.
Philip Morris International, which sells the Marlboro brand outside the United States, rose 1.9% to $100.83 at 1:18 p.m. in New York due to a general decline in the U.S. stock market. Swedish matches rose 4.7% in Stockholm trading this year.
As global regulation becomes more and more stringent, Philip Morris has been at the forefront of the diversified development of the tobacco industry. The company developed the iqos heated tobacco system and agreed to acquire asthma drug developer vectura Group PLC last year. It also acquired fertin Pharma, which produces a smoking cessation supplement.
An agreement will push Philip Morris into the growing field of oral nicotine products, many of which are very different from chewing tobacco in the past, in bag form and white.
Altria Group Inc. separated from Philip Morris International in 2008 and sold Marlboro cigarettes in the United States. The group also relies on its on! Shipments doubled in the first quarter. Analysts said there was fierce competition in this area.
Jefferies analyst Owen Bennett said in a research report that through the acquisition of Swedish matches, Philip Morris will win a wider distribution network for its low-risk products in the United States and help it launch iqos or e-cigarette products to American consumers.
Bennett said that if the transaction continues, it will constitute a competitive blow to Altria and British American tobacco, which may terminate Altria's agreement to sell iqos in the United States and urge it to fully control the ownership of Juul labs Inc., an e-cigarette manufacturer.
Bennett said: we also do not rule out a counter-offer for Swedish matches.
He said Japan Tobacco Inc. was the most likely potential buyer.
The vision of Swedish match is a world without cigarettes. It is a leading manufacturer of snuff. Snuff is a smokeless tobacco product that is popular in Sweden, but is banned in most other parts of Europe. Users place it between their upper lips and gums. It also produces zyn nicotine bags sold in the United States.
The Stockholm based company decided to suspend the spin off of its US cigar business in March because of the increased regulatory risks facing the company. At that time, the company said that the U.S. Food and Drug Administration informed it that the so-called substantive equivalent name of its application was rejected, affecting about 3% of the company's cigar sales in 2021.
Analysts at Bloomberg intelligence said that we believe that Philip Morris International's $15 billion acquisition of Swedish matches, a smokeless tobacco producer, is not the best use of PMI capital. Although the acquisition of Swedish match will extend PMI's overall strategy to create a smoke-free company, it will also further consolidate its position in the controversial tobacco industry.
Such a listing would end the Swedish company's business of manufacturing combustible tobacco products. Nevertheless, it has gained strong brand recognition for products such as zyn and its leading position in the smokeless product market in the United States and Northern Europe. Strong trading volume helped the company report a fourth quarter operating profit of 1.96 billion kroner ($195 million), exceeding analysts' average expectations.
Smokeless includes nicotine bags and medical treatments. Swedish match has been actively defending its position and trying to shut down its rival nicotine bag manufacturer, but its lawsuit against dryft Sciences LLC, the holding company, failed. Kretek International Inc. sold the drfyt nicotine bag business to bat in 2020, which sold the bags under the velo brand. Swedish match is appealing against the ruling.