By Richa Naidu
LONDON (Reuters) -Some Swedish Match traders are divided about whether or not Philip Morris (NYSE:)’ $16 billion provide for the Stockholm-based firm is nice worth for one of many world’s largest makers of oral nicotine merchandise.
The Marlboro maker agreed on Wednesday to purchase Swedish Match in a guess on the rising marketplace for cigarette alternate options. Swedish Match has really useful shareholders settle for the provide.
“The provide is actually a wholesome premium to the place the corporate was buying and selling. It is a fairly wholesome a number of general,” mentioned Kevin Dreyer, co-chief funding officer, worth, at GAMCO Traders Inc, Swedish Match’s tenth largest investor.
Not everybody agrees.
On Wednesday, Sydney, Australia-based Bronte Capital, which mentioned it owns about 1% of Swedish Match, complained that the determine undervalued the group.
John Hempton, co-founder of the hedge fund, mentioned he had been contacted by many shareholders opposing the deal both as a result of the worth was too low or as a result of they need the corporate to remain as it’s.
Analysts at Barclays (LON:) additionally mentioned the provide worth was too low.
“Given the chance Philip Morris sees in Swedish Match, we predict Swedish Match’s shareholders might get a greater worth,” they mentioned in a analysis notice.
Philip Morris’s curiosity within the enterprise highlights the urgency amongst cigarette-makers to faucet new and doubtlessly much less dangerous alternate options.
Swedish Match’s merchandise embrace Zyn nicotine pouches, that are tobacco-free and quickly rising in reputation in the USA and Scandinavia.
Dreyer mentioned the enterprise might entice curiosity from a rival bidder comparable to Japan Tobacco (OTC:) however believes it’s attainable that Philip Morris might raise its provide if wanted.
“Philip Morris has very deep pockets and can be a troublesome firm to out-bid,” he mentioned.
Philip Morris, JTI and Swedish Match declined to remark.
Some traders suppose the U.S. firm wants to lift its provide to succeed no matter whether or not a rival provide materializes.
“I anticipate the deal goes to die,” mentioned Hempton.
Others suppose the present provide will probably suffice however do not rule out a rise.
“May PMI must finally provide some sort of sweetener?,” requested Dreyer. “I would not say probably, however it’s actually attainable.”