Focus: As deadline looms, some Swedish Match investors oppose Philip Morris deal

Philip Morris CR as

21/09/2022 15:59

* PMI made SEK 106 per share bid for Swedish Match in May
    * Long-time investor speaks out against deal
    * 90% of shareholders need to give green light
    * Offer deadline is Oct. 21

 (Adds Swedish Match response)
    By Marie Mannes and Richa Naidu
    GDANSK/LONDON, Sept 21 (Reuters) - The clock is ticking for
tobacco giant Philip Morris  PM.N  to rally support from Swedish
Match shareholders for its offer to buy the snus maker - and not
everyone is on board.
    Chicago-based Framtiden Partnerships, a Swedish Match
shareholder for nearly two decades, told Reuters on Wednesday
that it opposes Philip Morris' (PMI) proposed takeover of the
Stockholm-based company. 
    The investor - incorporating Framtiden Management Company
LLC and affiliates - which owns 1% of Swedish Match, has written
a white paper urging others to reject the deal that 90% of
shareholders need to approve before October 21, by Swedish law.
    Framtiden believes PMI's SEK 106 ($9.63) per share offer
"does not adequately value Swedish Match's leading position in
the rapidly growing non-tobacco nicotine pouch segment in the
United States". Managing Member Dan Juran estimates the business
to be worth close to SEK 200 per share.
    According to Euromonitor International, Swedish Match
controls about half the world's market for snus - a
Swedish-style snuff that is moist and smoke-free. The company is
also the global industry leader for nicotine pouches.
    Juran, who is also chairman of Swedish Match's nominating
committee, warned other investors not to be "tempted by the
short-term premium" Philip Morris had offered. His Swedish Match
position accounts for over a quarter of his total capital.
    "I was dismayed to see the board recommend the sale of this
Swedish jewel at a bargain price in the early stage of probably
the greatest chapter in its long history," Juran said. 
    Swedish Match has been trading above the SEK 106 offer price
since late July, suggesting investors anticipate PMI will need
to make a higher offer.
    DNB Markets analyst Jesper Ingildsen said it is currently
highly uncertain whether PMI will be able to cross the required
90% threshold to acquire the whole company. Swedish Match has a
fragmented ownership base, he said, making it difficult to get a
clear overview of how many will accept the deal.
    Swedish Match declined to comment. Philip Morris did not
immediately respond to a request for comment. 

    'THREE SHAREHOLDER CAMPS'
    John Hempton, co-founder of Sydney-based Bronte Capital, is
another Swedish Match shareholder who hopes the deal will fall
through.  urn:newsml:reuters.com:*:nL2N2X41M7 
    Hempton, who holds a 1% stake in Swedish Match, told Reuters
that he and other undisclosed shareholders believe that the
company has the potential to end up as a $100 billion company
that could find itself with 10-20% of the U.S. nicotine market. 
    "There are basically three camps; those who plan on
accepting the deal, those who will try to get the offer price
increased, and those who want Swedish Match to stay as Swedish
Match, and I am firmly in the last camp," Hempton says.
    Swedish real estate entrepreneur Erik Selin, who according
to Swedish Match's website on Aug. 20 owned around 0.4%, told
Reuters previously he planned on accepting the offer. Selin, a
shareholder in Swedish Match since 2005, said he thought the
offer price was fair and considered PMI a good buyer for the
Swedish company. 
    The largest shareholders of Swedish Match, which include
Wellington Management, Capital Group, BlackRock and Vanguard,
all declined to comment on the deal. 
    
    ACTIVIST IN THE WINGS
    On Sept. 2, Elliott Investment Management said that the
stake it had been building in Swedish Match since PMI's offer
had reached 5.25%, making it one of the largest shareholders in
the company. 
    The activist investor was planning on opposing the Marlboro
maker's bid under its current terms, Bloomberg reported in July.
 urn:newsml:reuters.com:*:nL4N2YO3FU
    It was shortly after Elliott's rumoured involvement that
Swedish Match's shares started to rise above the offer price,
having shot up to that level from SEK 76 shortly after the offer
was made in May.
    Handelsbanken analyst Karri Rinta said he thought it
unlikely that PMI would up its bid, viewing the likelihood of an
activist investor succeeding as low.
    "PMI is the bidder that can afford to pay the most, since
they have very little overlap with Swedish Match today," he
said. "All other industrial buyers would run into all kinds of
divestment troubles."
    
    
    ($1 = 11.0047 Swedish crowns)

 (Reporting by Marie Mannes in Gdansk and Richa Naidu in London.
Additional reporting by Agata Rybska; Editing by Matt Scuffham,
Kirsten Donovan)
 ((Marie.mannes@thomsonreuters.com))