Philip Morris International has bid $ 16 billion for the Swedish match

Swedish matches make the most of the profits from Swedish-style smoke-free tobacco snuff, also known as ‘snas’.

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Marlborough-maker Philip Morris International on Wednesday confirmed a $ 16 billion bid to buy rival Swedish matches as part of its accelerated push for a smoke-free tobacco alternative.

Shares of the Stockholm-based manufacturer reached record highs in early trade when its board agreed to a 161.2 billion kroner cash offer from the US-Swiss tobacco giant.

The Swedish match is now trading at a 32% premium since the talks between the two companies were first announced on Friday. Following a stormy ride from Friday, Philip Morris International stocks are trading slightly higher.

The agreement, now subject to shareholder approval, marks the latest in a series of ongoing efforts by Philip Morris International to reduce reliance on traditional cigarettes in a growing public scrutiny.

A market leader in the non-smoking ‘Snas’

The 107-year-old Swedish matchmaker is best known for producing traditional Swedish-style snuff, called “general snas”, a type of smoke-free tobacco bag that is placed between the upper lip and gums as an alternative to smoking.

Although illegal in the European Union for health concerns, the Swedish match General Snas was approved by the US Food and Drug Administration in 2019 because they “showed a lower risk of oral cancer, heart disease”. [and] Lung cancer “than cigarettes.

However, the FDA noted at the time that such products were not generally safe or that they were not FDA approved. “All tobacco products are potentially harmful and addictive,” it added.

Philip Morris International’s bid for the Stockholm-based Swedish match forms part of a broader plan to expand beyond traditional cigarettes.

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Meanwhile, the company has seen a rapid increase in consumer demand for its new, tobacco-free nicotine pouch, “Zyn”, in recent years amid growing consumer demand for cigarette alternatives.

In the first quarter earnings released on Wednesday, Swedish Match reported a significant increase in sales and profits from gin in the United States, with deliveries up 35%.

The United States is now responsible for the largest market for Swedish matches after Scandinavia, and dominated by Jean Pouch in a market flooded by rivals, including British American Tobacco plc and Altria Group, from where Philip Morris International started in 2008.

Philip Morris quit smoking

Philip Morris International is based in the United States, but does not sell its products there. Rather, it distributes its products internationally, including Marlboro Cigarettes, L&M, Lark and Philip Morris.

Through the agreement, it aims to regain access to a readymade distribution network in the area of ​​its former owner’s home.

This is Philip Morris International’s latest move to diversify beyond traditional, tobacco-based revenue streams. In 2021, it agreed to take over the Vectura Group of Asthma Drug Development and is also responsible for creating the IQOS heated-tobacco system.

As of last year, the company’s smoke-free portfolio accounted for about 29% of its net income, or 31.4 billion.

Campaign groups have condemned tobacco giants, which have a long history of denying the health risks of smoking, for supporting themselves as part of a transition to a smoke-free world, as well as for continuing to sell and promote cigarettes worldwide.

Other smokeless tobacco products from the Swedish Match include America’s Best Chew, a chew-tobacco product, and Longhorn, a type of moist snuff brand.

Philip Morris International said the completion of the offer was conditional on regulatory approval and that no other company had made the offer.

However, Credit Suisse analysts said in a note that the potential counterbids look unlikely. Japan Tobacco International has little appetite for entry into the U.S. market, it noted, while British American Tobacco and Imperial will be reluctant due to antitrust concerns in the United States and Scandinavia.

– CNBC’s Sam Meredith contributes to this article.

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