Swedish Match Shares Jump To Record High On Philip Morris Takeover Move

Shares in Swedish Match soared on Tuesday after U.S. rival Philip Morris International Inc said it was in talks to buy the Stockholm-based tobacco products company, betting on a growing market for alternatives to cigarettes.

The two companies issued separate statements after the Stockholm bourse closed on Monday, confirming media reports of the talks, saying it was uncertain whether an offer would be made.

Swedish Match generates the bulk of its profit from Swedish-style snuff called "snus" but its relatively new tobacco-free nicotine pouch product Zyn is growing fast in Scandinavia and the United States.

The company's shares rose to record levels in early trade and were up 24% at 0912 GMT.

"The acquisition of Swedish Match, if confirmed, would be extremely well aligned with PM's strategic goals and would have a reasonably straightforward route to regulatory approval," said Alastair Mankin, vice president at brokerage Cowen.

"This wouldn't be the case for Altria and BATS, the two companies with the scale to compete."

Shares in Marlboro cigarettes maker Philip Morris, which is looking to expand its smoke-free options amid rising global scrutiny of the sale of traditional cigarettes, closed up 1% on Monday.

"Strategically, we think this makes a lot of sense," analysts at Jefferies said in a note to clients." It would give PMI a leading position in European smokeless, while critically, also giving distribution in the U.S. for its own broader RRP (reduced-risk products) roll-out."

The Jefferies analysts said they would not rule out a counter-bid for the Swedish group.

Swedish Match's Smokefree division, which includes snus and Zyn, accounted for around two-thirds of group sales - or 12 billion crowns ($1.2 billion) in 2021, with cigars accounting for a quarter.

The group in March paused plans to spin off and list its U.S. cigar business, its second-biggest segment after snus. Its products also include chewing tobacco, U.S.-style moist snuff, matches and lighters.

In the United States, Swedish Match is the biggest player in the nicotine pouch and chewing tobacco markets, according to its website, and third-biggest in the moist snuff category. In Scandinavia, Swedish Match is the market leader for snus products and number two for nicotine pouches.

Analysts at SEB said in a note to clients that rivals BAT, Altria, Japan Tobacco or even an investment firm could be interested, too, in buying Swedish Match, or parts of it.

A sales of the cigars segment would Swedish Match exit the combustible tobacco products segment having already sold its cigarette business in 1999. Researchers debate the health effects of snus.

Swedish Match is due to report first-quarter results on Wednesday.

($1 = 10.0416 Swedish crowns)