Philip Morris International strikes $16bn deal for Swedish Match

Philip Morris International has struck a $16bn deal to buy Swedish Match, as the tobacco company makes its biggest bet yet on alternatives to cigarettes.

Swedish Match is a leader in so-called snus, or oral nicotine pouches, that originated in its domestic market but have grown increasingly popular outside Scandinavian countries.

The Stockholm-based company owns Zyn, the largest nicotine pouch brand in the US, increasing the appeal of the deal for PMI, which has lacked a significant presence in America for more than a decade. Sales of Swedish Match’s snus grew more than 50 per cent last year in the US and Scandinavia.

Under the terms of the deal announced on Wednesday, PMI said it would pay SKr106 ($10.57) per share for Swedish Match, a premium of 39 per cent to the closing share price on May 9, before talks between the companies became public.

The board of Swedish Match, which has net debt of about $1.3bn, has recommended its shareholders accept the offer.

“If you look at the reasons why PMI would be buying Swedish Match, it’d be for that US push opportunity,” said Jonathan Fell, a partner at investment house Ash Park Capital, which owns PMI shares.

Best known for selling Marlboro outside the US, PMI has been the most aggressive among traditional cigarette companies in its bid to gain market share in so-called new-generation products, including vapes and heated tobacco devices.

Its push to reinvent itself and “unsmoke the world” has proved controversial, with a £1bn deal to buy Vectura, a UK-based developer of asthma inhalers, prompting fierce criticism.

PMI traces its roots to 2008 when US-based Altria decided to spin off its international business. Its largest smoke-free product is the heated tobacco device IQOS, which was previously distributed in the US by Altria.

Swedish Match and PMI have collaborated before, including a shortlived 2009 venture designed to “commercialise Swedish snus and other smoke-free tobacco products worldwide”.

PMI on Wednesday did not detail any cost savings from the deal but said that its plans “do not include any material changes with regard to Swedish Match’s operational sites, or its management and employees, including their terms of employment.”

Jacek Olczak, chief executive of PMI, said that the acquisition would “open up significant platforms for growth in the US and internationally.”