SM Pauses Separation of Cigar Business

    Photo: Swedish Match

    Swedish Match has suspended the separation of its cigar business until further notice.

    On Sept. 14, 2021, Swedish Match announced its intention to spin off its cigar business to shareholders and subsequently list it on a U.S. national securities exchange. The separation was initially expected to be completed in the second half of 2022, at the earliest.

    The decision to suspend the separation was driven by regulatory uncertainties, according to Swedish Match.

    “While supply chain related challenges have contributed to the financial development of the U.S. cigar business falling short of Swedish Match’s expectations in recent quarters, today’s decision to suspend the spin-off preparations was prompted by regulatory uncertainties facing the cigar business,” the company wrote in a statement.

    The U.S. Food and Drug Administration recently denied substantial equivalence (SE) designations for applications corresponding to about 3 percent of Swedish Match’s 2021 cigar volume. According to Swedish Match, it cannot be ruled out that additional SE applications for the cigar assortment will be denied in the first instance as FDA continues to work through remaining applications.

    Swedish Match said it plans to appeal the non-SE designations by the FDA by requesting a supervisory review. The company remains confident that it will be given the opportunity to provide the FDA with sufficient data in order to demonstrate that the cigars in question are substantially equivalent to their predicate products insofar that the changes that have taken place do not raise questions of public health.

    “Swedish Match is confident that the above-mentioned issues will be resolved or efficiently mitigated in due course,” the company wrote in its statement. “However, the board’s view is that the decision to suspend spin-off preparations until further notice is in the best interests of our shareholders. As the potential impacts from regulatory uncertainties have been clarified, the Swedish Match board expects to resume plans to separate the cigar business.”