Philip Morris eyes acquisition of Swedish smokeless tobacco company

Cigarette kingpin Philip Morris International (PMI) wants to see his business burn on both sides, but not literally.

As part of the latest move to reshape its business so that 50% of its revenue comes from smoke-free products, PMI has focused on acquiring Swedish Match, a Stockholm-based multinational tobacco company that recently experienced a resounding success in the smoke-free sector. On Monday, the two companies confirmed The Wall Street Journal that the negotiations have entered advanced talks – and that a deal could be reached as early as Friday.

Where there is no smoke there is fire

PMI – the spun-off international tobacco company that sells Marlboro, Chesterfield, Phillip Morris and other brands of cigarettes in non-US markets – has faced the same crisis as all the other big competitors in the space : All of these anti-tobacco PSAs worked. Really, really good. Consumers have been burning fewer cigarettes every year for nearly two decades (apart from a brief, certainly stress-induced spike in 2020), prompting PMI to aggressively shift to e-cigarettes, vapes and others forms of smokeless tobacco. The company’s stated goal is to generate more than 50% of its net revenue from smoke-free products by 2025. Last year, with revenue of more than $30 billion, its smoke-free mainstay accounted for nearly 30% of its total turnover.

Enter Swedish Match, which has been on a killing spree in recent years on products that, well, aren’t as likely to kill customers (in 2019, Swedish Match won FDA approval to advertise its tobacco offerings without smoked as products with a lower risk of causing mouth cancer, lung cancer and heart disease than traditional cigarettes). For PMI, the acquisition of Swedish Match represents the ideal opportunity to pursue its five-year plan and to energize the activity in the process:

  • Smoke-free products accounted for more than 65% of Swedish Match’s total revenue last year, part of double-digit sales growth. Leading the pack was Zyn, its diamond-shaped “nicotine pouch” that sold nearly 174 million cans in the United States last year, which, according to the company’s website, translates into a 64% market share of the nicotine pouch industry.
  • Overall, the deal could be worth more than $15 billion, according to WSJ sources familiar with the negotiations.

A variable that could send any possible agreement up in smoke remains: on Wednesday, Swedish Match will publish its results for the first quarter of the year. Should the acquisition go through, it would be PMI’s fifth and largest transaction since the start of 2021.

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