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Elliott Management Increases Swedish Match Stake, Complicating PMI Takeover Bid

The takeover battle for Swedish Match AB took a new twist Friday when US hedge fund Elliott Investment Management LP disclosed it had increased its stake in the nicotine-pouch maker to 10.5%

October 28, 2022
5 minutes
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The takeover battle for Swedish Match AB took a new twist Friday when US hedge fund Elliott Investment Management LP disclosed it had increased its stake in the nicotine-pouch maker to 10.5%.Elliott's move puts pressure on Swedish Match's board to engage in talks with the hedge fund, which has been pushing for a merger with US tobacco giant Altria Group Inc.Elliott now owns about 36 million Swedish Match shares, making it the company's second-largest shareholder after Altria.

The hedge fund has been urging Swedish Match to engage in talks with Altria about a possible merger, arguing that such a deal would create significant value for shareholders. Swedish Match has so far resisted Elliott's pressure, saying it is not interested in selling the company.It remains to be seen how Elliott's increased stake will impact the takeover battle for Swedish Match.

The move by the hedge fund gives it the power to block a recently sweetened offer by Swiss tobacco company Philip Morris International Inc. The revised offer for Swedish Match has a 90% acceptance condition, which PMI said earlier this month is "critical to capture the full potential of the combination."

Elliott Management Corporation, a hedge fund run by billionaire Paul Singer, has increased its stake in Swedish truckmaker Volvo to 5.1 percent.The move comes after Volvo announced plans to spin off its truck business in an effort to focus on its core businesses of construction equipment and buses.Elliott believes that Volvo is undervalued and that the spin-off will create value for shareholders.The hedge fund has been buying up shares of Volvo since early October and now holds more than 10 million shares.

Hedge fund firm Nordic Capital has previously said that it opposes Philip Morris International's (PMI) initial bid to acquire Swedish Match, arguing that the bid undervalues the Swedish company. Nordic Capital believes that Swedish Match's business could give PMI a vast distribution network in the US for smoking alternatives like vaping, nicotine pouches and heated tobacco.The US is the world's biggest market for such products, and all of the major tobacco companies are jostling for position there. On Thursday, Altria Group Inc. formed a joint venture with Japan Tobacco International to promote two new cigarette alternatives.

PMI has already made a "best and final" offer of 116 kronor ($10.5) per share for Swedish Match, which expires on Nov. 4. However, the company said in a statement on Oct. 25 that it "may, but is not obligated to" lower the acceptance rate after the bid expires next week. It added that it would not waive the acceptance rate condition to below 50% after the bid expires.

The representatives for PMI and Elliott declined to comment when asked about the situation.

Swedish Match shares were up slightly by 0.4% at noon local time in Stockholm. Earlier Friday, the company reported third quarter operating profit that missed analyst estimates. However, the company's shares have still managed to hold onto gains made earlier in the week.

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