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Highlights
- US tobacco giant Philip Morris Inc. (NYSE:PM) to take over European rival Swedish Match.
- Philip Morris and Stockholm-based Swedish Match deal likely to be finalized this week.
- Philip Morris has a market value of about US$154 billion.
American tobacco company Philip Morris Inc. (NYSE:PM) is in advance talks to acquire its European rival company Swedish Match.
Philip Morris International is a market leader in the tobacco cigarette alternative space in the US. Its IQOS heated tobacco cigarette alternative is the sole e-cigarette that received approval to sell. The cigarette alternative also earned a reduced-risk label from the FDA.
The deal between Philip Morris and Stockholm-based Swedish Match could be finalized this week, reports Bloomberg. However, people with knowledge of the contract told Bloomberg that there are chances it might swing either way with equal chances of falling apart.
The deal, which could be valued at about US$15 billion or more, will boost the US tobacco giant’s exposure in a fast-growing smoke-free brands market.
The valuation of Swedish Match is about US$12 billion or 117 billion Swedish krona. On the other hand, Philip Morris has a market value of about US$154 billion.
Swedish Match is a profitable company that posted a double-digit sales growth in 2021, spearheaded by its smoke-free division in the US.
Philip Morris International exports Marlboro cigarettes to other countries.
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Philip Morris focuses on alternative tobacco products
The company is fast expanding into alternative tobacco products, perceived as less harmful than smoking. It aims to generate 50% of its net revenue from smoke-free products by 2025.
In 2021, 29% of its net revenue, or US$31.4 billion, was driven by its smoke-free products.
Other sources of revenue include international sales of its cigarettes, nicotine pouches, e-cigarettes, and heated-tobacco products.
For that matter, the US smokeless tobacco brands of Swedish Match include Longhorn, a type of moist snuff brand, and America’s Best Chew, which is a chewing-tobacco product.
The PM stock was trading at 1.52% higher to US$100.44 at 3:29 pm ET after the development.
Bottom line:
This acquisition is part of Philip Morris’s plan to deviate from cigarette sales and reduce its reliance on tobacco products.
