- PMI requires 90% stake for forced minority buyout
- PMI believes that the goal can eventually be achieved
- PMI says Swedish Match’s top 10 investors have tendered shares
Nov 7 (Portal) – Marlboro maker Philip Morris International (PMI) (PM.N) overcame some resistance to gain 83% from Swedish Match (SWMA.ST), less than the 90% it wanted but enough to convince him to go ahead with a $16 billion deal that will reduce his exposure to cigarettes.
PMI had previously said it could drop its bid if it doesn’t meet the 90% threshold at which it can begin a forced purchase of the remaining shares.
The US group said on Monday it believes the level can eventually be reached and that Swedish Match’s 10 largest shareholders have accepted their offer.
That would mean activist investor Elliott Management, which had built a 10.5 percent stake in Swedish Match and opposed PMI’s bid, would have tendered its shares. Elliott declined to comment.
“Our intention is still to keep the company fully private, so it is better for (Swedish Match) shareholders if they tender their shares,” PMI chief executive Jacek Olczak told Portal.
PMI said it extended its now unconditional offer until Nov. 25 in hopes of further increasing its stake, and Olczak said that, among other holdouts, could prompt some index funds that have not yet tendered their shares
PMI made an offer of 106 kroner per share to buy Swedish Match in May, then raised it to 116 kroner per share in October after some investors said the original price was too low.
The acquisition of Swedish Match, with its popular moist snuff “Snus” products and tobacco-free nicotine “ZYN” pouches, will support PMI in its stated goal of moving away from harmful cigarettes and eventually becoming a smoke-free company.
The deal will also help pave the way for PMI into the US market, where Swedish Match has been rapidly expanding its business and where PMI is currently not present.
“I see strong industrial logic in the combination and see that Swedish Match can work with PMI in both scenarios,” said Lars Dahlgren, CEO of Swedish Match, referring to whether the company is going public or at PMI remains listed as the majority shareholder.
When asked about his future with the company, Dahlgren, who has been CEO since 2008, said it was to be seen as there was no formal agreement, but added that he “enjoyed working at Swedish Match”.
Jefferies analysts said in a note to clients that PMI might have promised the investor a special dividend or a seat on the board to get Elliott’s approval.
According to Portal calculations, Elliott will earn over $100 million in profits from his investment, or a return of more than 6.4%.
PMI and Elliott declined to comment.
John Hempton, co-founder of Sydney-based Bronte Capital, was also opposed to the deal but said on Sunday he would offer his shares if Elliott had done the same.
Philip Morris’ takeover bid has Swedish Match shares glowing
Reporting by Marie Mannes Editors by Terje Solsvik and Mark Potter
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