Phillip Morris International has agreed to a 161.2 billion Swedish crowns ($16 billion) cash offer to buy Swedish Match. The agreement sent shares in the European smoke-free tobacco producer soaring sky-high.
The terms of the deal stipulate that Phillip Morris (ticker: PM) will pay 106 Swedish crowns per share for Swedish Match, the company said in a statement it released. The shares were purchased at a 39.5% premium to the company’s share price of 76.50 Swedish crowns on May 9 after the two companies initially disclosed their ongoing talks.
Swedish Match (ticker: SWMA.Stockholm) shares jumped 9.1% to 103.6 billion Swedish crowns in early morning trading on Wednesday.
Within the U.S. market, Swedish Match is the company behind the brand ‘Zyn’, a tobacco-free oral nicotine pouch that slips between the upper gum and cheek- one of the country’s number one brands of nicotine pouches. In Scandinavia, the company is recognized as the market leader for snus oral tobacco pouches.
Phillip Morris International, the company behind the Marlboro brand outside the U.S., has remained true to its commitment on delivering a “smoke-free future” as it attempts to offset the decline in sales of traditional tobacco products. The company, which has developed the IQOS heated-tobacco system, last year paid a whopping $1 billion to buy U.K. based inhaler company, Vectura.
Analysts at Bernstein lowered their rating of PMI rival Altria (ticker: MO) on Tuesday, citing the acquisition of Swedish Match by PMI as a possible look into who will dominate the next generation of smoking products in the U.S.
However, one of the conditions of PMI’s deal is its obtaining over 90% of acceptances from Altria shareholders.
“Achieving 90% acceptances is critical in Sweden, so investors may still hope for a small price improvement to bring 90% of the register on their side,” said Alastair Mankin, vice president at brokerage Cowen. “The fly in the ointment here will be lingering concerns over the potential for an extended antitrust review in the U.S. based on future competition.”