Philip Morris’ Swedish bet may take multiple tokes

Philip Morris' Swedish bet may take multiple tokes

LONDON, Oct 20 (Reuters Breakingviews) – Philip Morris International (PM.N) may need to show more flexibility. The maker of Marlboro cigarettes juiced up its $16 billion offer for Swedish Match (SWMA.ST), which sells Zyn nicotine pouches, by over 9% to 116 Swedish crowns per share, and said that the offer was its “best and final price” . The move follows opposition from funds including Elliott Investment Management, Abrdn (ABDN.L) and Bronte Capital.

PMI Chief Executive Jacek Olczak has strengthened his hand by sealing a $2.7 billion deal with Altria to buy the rights to sell IQOS heated tobacco products in the United States, giving him an alternative way to grow in smokeless tobacco products. Still, it may be hard to get the Swedish Match deal over the line, given PMI’s ambitious 90% acceptance rate. Bronte Capital has rejected the raised offer, and it can be hard to corral retail investors to vote, while index-tracking funds often wait until the last minute to tender shares.

Olczak could, however, lower his acceptance threshold to, say, 50%, enough to give him control. That’s probably why the shares are currently trading close to the offer price at 112 crowns. Still, that could lead to challenges in integration, making an already rich deal worse. (By Aimee Donnellan)

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Editing by Neil Unmack and Oliver Taslic

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