Philip Morris International has struck a $16 billion deal to buy Swedish Match as the tobacco company makes its biggest bet on cigarette alternatives.
Swedish Match is the leader in so-called snus or oral nicotine pouches, which originated in its home market but are growing in popularity outside Scandinavian countries.
The Stockholm-based company owns Zyn, the largest U.S. nicotine pouch brand, adding to the deal’s appeal to PMI, which has lacked a significant U.S. presence for more than a decade. Sales of Swedish match snus in the U.S. and Scandinavia rose more than 50 percent last year.
Under the terms of the deal announced Wednesday, PMI said it would buy Swedish Match for 106 crowns ($10.57) a share, a 39 percent premium to its previous closing price on May 9. talks between companies made public.
The board of Swedish Match, which has net debt of about $1.3 billion, has recommended its shareholders accept the offer.
“If you look at why PMI is buying Swedish Match, it’s because of the U.S. push opportunity,” said Jonathan Fell, a partner at Ash Park Capital, an investment firm that owns PMI stock.
best known for Sell Marlboro Outside the U.S., PMI has been the most aggressive of traditional cigarette companies to fight for market share in so-called next-generation products, including e-cigarettes and heated tobacco devices.
PMI’s history dates back to 2008, when U.S.-based Altria decided to spin off its international operations. Its largest smokeless product is the heated tobacco device IQOS, previously distributed by Altria in the United States.
Swedish Match and PMI have worked together before, including a short-lived joint venture in 2009 to “commercialise Swedish snus and other smokeless tobacco products”.
PMI on Wednesday did not detail any cost savings from the deal, but said its plans “do not include any significant changes to Swedish Match’s locations of operations or its management and employees, including their terms of employment.”
PMI Chief Executive Jacek Olczak said the acquisition will “open up an important platform for growth in the U.S. and internationally.”