Hedge Fund Might Force PMI to Raise its Swedish Match Bid  

Photo: Swedish Match

A hedge fund might force Philip Morris International to raise its bid for Swedish Match, according to an article in The Wall Street Journal.

On May 11, PMI offered SEK161.2 billion ($16.14 billion) to purchase Swedish Match. The acceptance period for the offer was initially set to expire on Sept. 30, 2022, but was later extended to Oct. 21, 2022, as the bid awaits approval from the European Commission.

The offer is conditional on PMI gaining more than 90 percent of Swedish Match’s Stockholm-listed shares.

Since the companies announced their deal, Elliott Management Corp. has acquired an undisclosed stake in Swedish Match. According to Massimo Stabilini, a hedge-fund manager at London-based Sinclair Capital, Elliott is trying to get a better price from PMI.

Elliott would need to buy close to $1.6 billion worth of Swedish Match stock to stop Philip Morris reaching 90 percent, suggesting it might need others to join its campaign. Under Swedish rules, it will also have to disclose its holding if its stake reaches 5 percent.

Elliott is not the only Swedish Match shareholder seeking better terms. Earlier this year, shareholder Bronte Capital also opposed the takeover, saying the offer price was “unacceptable,” according to Reuters.

Investors holding out for a better price are betting that PMI will cough up rather than walk away from the deal. The acquisition is key to the cigarette giant’s stated goal of generating more than 50 percent of its net revenue from smoke-free products by 2025, up from 29 percent last year.

Elliott has proven willing to play a longer game before, according to The Wall Street Journal. In 2016, it took a more than 10 percent stake in Arcam after General Electric Co. agreed to buy the Swedish 3-D printing company. GE later raised its bid and lowered its minimum approval threshold to 75 percent.