Will Philip Morris Acquire Swedish Match AB?

In response to recent market speculation, Philip Morris International Inc. (NYSE: PM) has confirmed that discussions are in progress with Swedish Match AB (GB: 0GO4) regarding a potential offer for the company.

Through the potential deal, Philip Morris International aims to expand into alternative tobacco products and boost its exposure to the rapidly growing market for smoke-free products amidst heightened global scrutiny and regulations on the sale of traditional cigarettes.

Philip Morris International (PMI), with a market capitalization of $155 billion, is a leading international tobacco company focused on delivering a smoke-free future and enhancing its portfolio for the long term to include products outside of the tobacco and nicotine sector.

Shares of Swedish Match gained almost 24%, while Philip Morris International shares gained close to 1% following the confirmation news.

Possible Valuation

Headquartered in Sweden, Swedish Match develops, manufactures, and sells market-leading quality products with brands in the product segments Smokefree, Cigars, and Lights. The company’s production is located in seven countries, with the majority of the sales coming from the US and Scandinavia.

Swedish Match has a current market capitalization of around $12 billion (117 billion Swedish krona).

According to the Wall Street Journal, the deal could be concluded this week and could be valued at $15 billion or more.

However, Philip Morris also commented that it is not certain whether an offer will be made to Swedish Match and refrained from providing additional details of the potential deal.

Last year, Swedish Match delivered double-digit growth in sales, driven by its smoke-free division in the U.S., its largest market, and its main product, ZYN nicotine-pouch.

In 2019, the U.S. Food and Drug Administration approved Swedish Match to market its General Snus smokeless-tobacco products as they have a lower risk of mouth cancer, heart disease, and lung cancer compared to cigarettes.

Wall Street’s Take

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on six Buys and three Holds. The average Philip Morris price target of $112.33 implies 12.5% upside potential to current levels.

Key Takeaway

Like many of its peers, Philip Morris International is aggressively exploring new avenues for revenue generations to move away from the increasingly criticized traditional cigarette and the dampening sales over the last couple of years.

If it materializes, then the acquisition of Swedish Match, could be a great strategic fit and boost Philip Morris’s revenues and profits manifold.

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