PM USA to acquire Swedish Match?

Bonnie Herzog at Citgroup reported that PM USA may acquire Swedish Match after the PMI demerger. This is entirely possible, although we consider it likely there are other suitors for Swedish Match in the US market. Besides this PM USA must also have its eye on USST. Their US smokeless market share would gain for PM USA instant access to manufacturing, intellectual property and distribution in this key segment.

Bonnie has been consistently down on USST for a considerable period despite performance which frequently surpasses her pessimism (based on increased competition in the premium segment.) Is Bonnie’s analysis correct? Let us know what you think?

Do you think PM will more likely acquire Swedish Match or USST?

Do you think PM USA can develop a market presence in smokeless alone?

Which one do you consider to be the better fit – Swedish Match or USST?

31 comments ↓

#1 Erin 20 on 11.15.07 at 8:42 AM

Either way, we can all hope that it will spur upward pricing on smokeless.

It does make you wonder about antitrust issues. Will the Government allow such a tobacco behemoth…

With all of this activity and the looming FDA bill, it seems that PMI is agressively protecting its place in the market.

#2 cigguy on 11.15.07 at 9:06 AM

As much as Bonnie is a detractor of USST in the past and obviously we all know that USST has performed well she somehow finds a way of getting things like this right however I never saw her make the call on J. Middleton. I think Erin is right that as PM & RJ get more involved, pricing will increase as they gain a stronger foothold in the entire tobacco space.

#3 jeff on 11.15.07 at 9:20 AM

Ah – I see Bonnie has a CSP Cyber Conference coming???

#4 MST on 11.15.07 at 3:41 PM

With a #2 spot as the largest purveyor cigars worldwide, and as the declared #1 in the snus space, not to mention having the #1 brand in the loose leaf arena, Swedish Match would complete PM USA’s adjacency approach to all other tobacco products, given that John Middleton fills the little cigar niche. But the real play with Swedish Match is outside the USA when the ban on snus and alternative tobacco products is ultimately lifted in the EU and elsewhere and that is a PMI play, not USA.

#5 jd on 11.17.07 at 10:28 PM

I think it really makes sense for PM to buy Swedish Match as PM would then be a much more integrated tobacco company. With Reynolds already more developed one would then wonder how USST will compete with the big boys?

#6 Tatler on 11.21.07 at 10:44 AM

Swedish Match may be a good acquisition candidate for PM USA but everbody seems to be ignoring that USST would also work well too?

#7 John Rolfe on 11.23.07 at 12:54 PM

At the right price both Swedish Match and USST would be great fits for PM USA, with parts of the former also a great fit for PMI. Some analysts have argued that PM USA’s move is all about hammering USST’s stock price to get it below $50 a share, which it was later in the summer before climbing back over $54, still down from the plus $60 level. Meanwhile, Swedish’s share price had been racking up gain after gain over the past year, pretty much a straight trend line. Even if PM fails with its adjacency strategy, and its ability to be adjacent with a menthol cigarette leaves much to be desired, it might win with a stock price hit depending on how the analysts perceive USST’s and Swedish’s competitiveness. Will the pie get bigger faster than the share loss?

#8 The OTP Kid on 11.30.07 at 2:52 PM

RJR is going to try as hard as they can to buy Swisher. That will be the beginning of the end as far as the OTP rack is concerned as PM and RJR will start fighting for that space and it will become contracted.

Say goodbye to any cigars the two of the cigarette giants don’t own!!!

#9 Monte Cristo on 11.30.07 at 10:35 PM

Hey OTP KID – How does Imperial play their card with Altadis? Does the Commonwealth acquisition have any play. Looks like to me that the only company sitting out there all alone is USST then. And if PM were to buy Swedish then I guess Lorillard would need another partner. HMM maybe Lorillard should purchase USST and really mix it up. By the way, my handicap is really good! Are ya jealous?

#10 fredmertz on 12.03.07 at 3:47 PM

Are there any retailers reading this blog? Do any of them fear the JMI acquisition by PM and the talked of acquisition of Swedish and what that may mean a retail? Further consolidation is not good for retail and PM having any more clout than they currently wield is a scary thought if you are seriously in the tobacco business. I don’t believe most retailers are seriously looking at the longterm consequences nor do they probably care. You can bet your last nickle that all the small manufacturers are watching and are very concerned to about the viability of their brands and business over the long run.
PM controlling the total tobacco category at retail and using Marlboro as the hammer is right around the bend!!

#11 The OTP Kid on 12.03.07 at 6:01 PM

Monte – Lorillard seems fat and happy to sell Newpees all day long and stick the money in the bank ( I heard they were propping up Citi after the subprime fallout!). Not sure Commonwealth has any cards to play, they’re not big enough players to have a say in the set. Maybe they can use the power of El Producto to get some facing for Sonoma!

#12 Csoperator on 12.06.07 at 1:48 PM

Fred,

I’m a retailer and I’m not sure why others are not posting but they MUST realize that PM has NO DESIRE TO grow their (retailer’s) business. It’s all about domination. I guess PM has all the retailers convinced that they are not allowed to think any other way. This blog has a lot of interesting information and I have found it very informative and thought provoking. I’ve been doing this retail business a long time and I’m more concerned today than ever before at the strenght of PM. The only annoyance they have is the folks over at Lorillard who just have a damn awesome product! Small manufacturers should promote this blog from how I look at it. Get the the truth out and let be people be free from the shackles of PM & the wannabees at RAI.

#13 Legend on 12.09.07 at 10:50 AM

A couple of thoughts. Bonnie Hertzog must certainly be in some peoples pockets as her thoughts are always skewed in certain directions. The PM acquisition of Swedish Match may well be a defensive measure as the Lorillard/Swedish Match partnership is soon to roll out. The only competition that PM has is from Lorillard. PM’s new 2008 retail strategies seem directly targeted at RAI and I look for even more gloom there for RAI as Bonnie keeps perching them up. Finally, have to agree with CSOperator in that it is apparent at every level of the retail industry that PM only cares about themselves. Their attempts to push through FDA regulations since they feel they have control of the issue in writing the actual bill itself falls short of their knowledge of the bureaucratic system because once in place, actual day to day decisions and policies come down to the regulators who will have been given the power without having to report back or ask permission to do what they want. Bottom line with FDA, even if approved, the change that will be seen is a never ending series of lawsuits including consumers, retailers and manufacturers regarding what can be done and when along with the lack of effectiveness considering the FDA chief doesn’t even want the responsibility of regulating tobacco products.

#14 CSoperator on 12.10.07 at 1:46 AM

I had to laugh today when I was reading CS Decisions and PM congratulated Couche-Tard on winning CSD Chain of the year award. “Your Success is our Priority” – would have been more accurate if it said “Your control (by us) is our Priority”

Hey legend you’ve got some awesome input! What you think of PM purchasing JM?

#15 monte cristo on 12.19.07 at 2:07 AM

I read where Lorillard was looking to acquire other tobacco offerings in the US but if RJR buys Swisher and PM buys Swedish and Altadis is already tied up – What is left? Wonder if any of the future meetings on Triumph take on a new meaning?

#16 The OTP Kid on 12.20.07 at 6:26 PM

Lorillard is being spun off by Loews Corp. Now most people seem to think it’s because Loew’s wants to sell it; but i think it’s because it frees them up to buy another company and then Loews doesn’t have to take the heat!

#17 Mr. Puff on 12.22.07 at 2:35 AM

I think it will be interesting to see if Lorillard is a buyer or a buyee. I would love to see them go buy USST or Swedish Match. Reynolds out bid PM for Conwood and the rest is history, what a sweet deal that has turned out to be a year and a half latter. Hey kid your right Loews has wanted to do this for the last 10 years.

#18 Patriot on 01.16.08 at 12:54 AM

I’d love to see Lorillard join up with USST but I think Lorillard may just grab Swedish Match from PM’s grasp.
Swedish Match has performed exceptionally well this past year!

#19 Mr Puff on 02.03.08 at 12:57 AM

Any recent info on PM and a possible USST acquisition?
Read where PM is expanding their tests.

#20 Moist Guy on 03.25.08 at 1:15 AM

Anyone have a pulse on the Atlanta Marlboro volume? Any one hearing that Marlboro moist is going to Dallas market place? Just wondering if the product has been improved yet.

#21 MONTE CRISTO on 04.16.08 at 11:23 PM

I heard the other day that PM was running a promo that was a buy 1 can get 4 free? Any one able to clarify the deal?

#22 Johnie Jay on 05.23.08 at 1:03 AM

I hope PM doesn’t buy anyone else. If they get anymore control of the industry I’m afraid there won’t be much more of an industry. Plus I would hate to see some great folks at Swedish just be treated like PM treated the folks at Middleton.

#23 MONTE CRISTO on 07.11.08 at 2:34 PM

Any truth out there regarding Philip Morris extending their moist test to mirror the recent RedMan launch? Love to know if there is any feedback on this?

#24 Troubadour on 08.01.08 at 12:23 AM

I wouldn’t be surprised to see Lorillard beat PM to the purchase! Pretty reliable source told me that it was a possibilty. Another option may be Lorillard buying USST! You never know till it happens!

#25 Big Tuna on 09.11.08 at 12:33 AM

Hey OTP Kid you still think that RJR will but Swisher? Was looking thru the blog entries and wonder what you think. Folks keep referring to RJR buying Lorillard. What you think about that?

#26 Creator on 11.24.08 at 9:59 PM

Does anyone think that JTI has any interest in Swedish Match?

#27 Troubadour on 11.26.08 at 2:13 AM

Swedish Match would be a great acquisition especially since they would truly know how to bring on the SNUS industry. PM & RJR really have an inferior product and users will most definitely find enjoyment in true Snus!
I am puzzled as to why Swedish is still not actively pursuing the Snus business. I had heard they wanted to let PM & RJR lay the foundation but that foundation is seriously flawed as the product is not true to the Sedish product!

#28 swna on 07.01.09 at 2:08 AM

I would love to see PM buy SMNA ..I’m all for it.

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