Philip Morris pinches Swedish Match after smoking out opposition

Nov 7 (Reuters) – Marlboro maker Philip Morris International ( PMI ) ( PM.N ) overcame some opposition to take 83% of Swedish Match ( SWMA.ST ), short of the 90% it wanted but enough to convince the one to continue. with a $16 billion deal that will reduce exposure to cigarettes.

PMI had previously said it could drop its bid if it did not reach the 90% threshold at which it can start a compulsory purchase of remaining shares.

The US group said on Monday it believed the level could eventually be reached and that Swedish Match’s 10 biggest shareholders had accepted the bid.

That would mean activist investor Elliott Management, which had built a 10.5% stake in Swedish Match and opposed PMI’s offer, had offered its shares. Elliott declined to comment.

“Our intention is still to take the company completely private, so it is better for the (Swedish Match) shareholders if they bid for their shares,” PMI CEO Jacek Olczak told Reuters.

PMI said it had extended its offer, now unconditional, to Nov. 25 in hopes of increasing its stake further, and Olczak said that could prompt some index funds that have not already offered their shares to do so, in addition to other holdouts.

PMI made an offer of NOK 106 per share to buy Swedish Match in May, raising it to NOK 116 per share in October after some investors said the starting price was too low.

Acquiring Swedish Match, with its popular wet snuff “snuff” products and tobacco-free nicotine “ZYN” pouches, will help PMI in its stated ambition to move away from unhealthy cigarettes and eventually become a smoke-free company.

The agreement will also help pave the way for PMI to the US market, where Swedish Match has grown its business rapidly and where PMI is currently absent.

“I see a strong industrial logic in the combination and see that Swedish Match can do things with PMI in both scenarios,” said Swedish Match CEO Lars Dahlgren, referring to whether the company is delisted or remains listed with PMI as the majority shareholder.

Asked about his future with the company, Dahlgren, who has been CEO since 2008, said it remained to be seen as there was no formal agreement in place, but added that he “enjoyed working at Swedish Match”.

Jefferies analysts said in a note to clients that to secure Elliott’s approval, PMI could potentially have promised a special dividend or a seat on the board to the investor.

According to Reuters calculations, Elliott stands to make more than $100 million, or more than a 6.4% return, on the investment.

PMI and Elliott declined to comment.

John Hempton, co-founder of Sydney-based Bronte Capital, has also opposed the deal, but said on Sunday he would bid for his shares if Elliott did the same.

Reporting by Marie Mannes Editing by Terje Solsvik and Mark Potter

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