Blog - Tobacco Reporter

Philip Morris Clinches Swedish Match

Philip Morris International is moving forward with its $16 billion takeover of Swedish Match despite securing less than the 90 percent stake it sought, reports Reuters.

In a press note dated Nov. 7, PMI said it had secured 82.59 percent of the Swedish company, short of the 90 percent level at which it can start a compulsory purchase of the remaining shares.

This suggests that Elliott Management Corp., which had built a 10.5 percent stake in Swedish Match and opposed PMI’s offer, has tendered its shares.

PMI also announced it would further extend the acceptance period for remaining shareholders until Nov. 25, 2022, adding that the price in the offer for shares tendered during the further extended acceptance period will be reduced to SEK115.07 in cash per share.

“We are pleased that 82.59 percent of Swedish Match shareholders, including—we believe—the top 10 shareholders, have tendered their shares at the best and final price of SEK116 per share. This achievement of a high controlling stake should allow us to harness the strategic potential of the transaction, including anticipated revenue synergies,” said PMI CEO Jacek Olczak.

“We look forward to welcoming Swedish Match’s employees and leading oral nicotine portfolio into the PMI family to create a global smoke-free champion.”

Jacek Olczak, CEO, PMI

“We are today extending the acceptance period until Nov. 25 to allow those shareholders who have not tendered—including outstanding index funds—additional time to accept the offer while waiving the 90 percent acceptance condition to provide certainty to those shareholders who have already tendered. Our objective is to delist the shares of Swedish Match from the stock market after reaching an ownership of more than 90 percent. We, therefore, encourage the remaining retail and other institutional shareholders to tender in the extended time.

“We look forward to welcoming Swedish Match’s employees and leading oral nicotine portfolio into the PMI family to create a global smoke-free champion, notably bringing IQOS and ZYN together in both the U.S. and international markets. We will be working together to create value as we accelerate toward our shared vision of a smoke-free future.”

Mark Kelly, managing director of Cowen’s Event Driven Group, welcomed the acquisition.

“History will likely prove this as a successful transaction all around,” he said. “Swedish Match shareholders engineered a material improvement to the already healthy premium that Philip Morris had offered, and Philip Morris has now secured ownership of a world-class smokeless operation. Swedish Match will help PMI accelerate its goal of going 50 percent smokeless by 2025 and also brings it a U.S.-wide distribution network to facilitate its own rollout of IQOS heat-not-burn products going forward.”

November 7, 2022

‘Jordanians Spend More on Tobacco Than Food’

Jordanians spend more on tobacco than on food, reports The Jordan Times, citing the World Health Organization.

According to the global health body, Jordanian households spend JOD73.6 ($103.80) per month on tobacco-related products compared with JOD27 on fruits, JOD38 on dairy products and eggs, JOD50 on meat and poultry, and JOD42 on vegetables and legumes.

With 82 percent of men aged between 18 and 69 lighting up, Jordan’s smoking prevalence is the world’s highest. Some 66 percent of men smoke cigarettes and shisha, according to local media agencies. Another 15 percent vape e-cigarettes.

November 7, 2022

EU HTP Flavor Ban to Take Effect Nov. 23

The European Union on Nov. 3 published the directive officially banning flavors in heated-tobacco products throughout the union, reports TobaccoIntelligence.

The publication follows the end of the scrutiny period on Oct. 29, during which neither the European Council nor the European Parliament raised objections to the ban.

The ban, which covers all flavors except tobacco, officially takes effect Nov. 23. EU member states than have until July 23, 2023, to transpose the rule into national legislation.

In the runup to the ban, critics suggested the European Commission was overstepping its delegated powers by introducing a new legal category—of heated-tobacco products.

Some member states raised concerns over whether the commission was empowered to introduce a definition of a new category of tobacco products in a Delegated Act.

More recently, Bulgaria, Cyprus, Greece and Italy issued a joint statement, saying the introduction of a definition of heated-tobacco products “goes beyond the delegated power under Directive 2014/40/EU and involves essential elements reserved for the European legislators and, as such, should be submitted to the ordinary legislative review process.”

November 6, 2022

Reynolds Requests Retrial of Vuse IP Case

R.J. Reynolds Vapor Co. has asked for a new trial after a U.S. District Court awarded rival Altria Client Services $95.23 million in damages related to an e-cigarette intellectual property dispute, reports the Winston-Salem Journal.

In early September, a federal jury determined that Reynolds Vapor’s Vuse Alto product infringes on three Altria patents.

In its retrial request, Reynolds Vapor stated that “Altria’s improper injection of inflammatory evidence regarding patent infringement allegations against Reynolds in other cases denied Reynolds a fair trial. Erroneous evidentiary rulings also prejudiced Reynolds’ ability to present its defense. Those errors independently, and under the cumulative error doctrine, affected the verdict such that a complete new trial is required.”

Altria said in a statement that “this was a fair trial. There is no basis for another trial, and we are pleased that the jury correctly found that Reynolds Vapor has infringed a number of our patents.”

The complaint concerns three patents awarded to Altria Client Services by the U.S. Patent and Trademark Office based on filings in April 2015.

Altria alleged Reynolds Vapor violated Altria’s patents covering the pod assembly used in Vuse Alto.

Reynolds believes the lawsuit was filed in retaliation for patent infringement complaints filed by Reynolds in April 2020 for infringement by Philip Morris International’s IQOS tobacco-heating device of six Reynolds patents.

Until recently, Altria was the exclusive U.S. distributor for IQOS in the United States.

On Sept. 29, 2021, the U.S. International Trade Commission upheld an initial determination from May 2021 that Philip Morris International’s IQOS device infringes on two patents owned by Reynolds. The ruling barred Altria Group from importing IQOS products into the U.S.

November 6, 2022

Hong Kong Mulls Age-Related Tobacco Ban

Hong Kong residents who were born in 2009 or later should be banned from buying cigarettes by 2027, the Council on Smoking and Health proposed on Nov. 3, reports the South China Morning Post.

The city’s smoking population dropped to 9.5 percent last year—hitting single digits for the first time since tracking began—but Chief Executive John Lee Ka-chiu has pledged to lower the rate to 7.8 percent in three years.

Other measures proposed include doubling the current tobacco tax by 2023–2024, which means a pack of cigarettes currently priced at HKD60 ($7.64) would rise to around HKD100. The council said the tax should be further raised in the following two years, so a pack of cigarettes would cost HKD200 by 2025–2026.

The council also recommended expanding the city’s nonsmoking areas to cover taxi and bus stands as well as spaces that fall within 10 meters of hospitals, schools and community facilities.

Hong Kong currently does not allow smoking on public transport, including its interchanges, in hospitals, schools, parks and indoor areas of restaurants, bars and malls.

Some lawmakers expressed concern about the proposed measures. Representing the wholesale and retail sectors, Shiu Ka-fai said poorer smokers would not be able to afford the product following the proposed tax increases.

He also opposed the idea of a “smoke-free generation” as the policy would limit freedom of choice.

The Long-term Tobacco Policy Concern Group, which represents smokers, opposed the tax hike, saying that consumers might buy illicit cigarettes instead of quitting and that the measure would impact the city’s economic recovery.

Council Chairman Henry Tong Sau-chai also opposed a proposal to reverse Hong Kong’s ban on the re-export smoking alternatives as a means to boost the economy.

In April, Hong Kong prohibited the import, sale or manufacture of smoking alternatives, such as e-cigarettes, heated-tobacco products and herbal cigarettes.

The legislation also prohibits smoking products from being transshipped through Hong Kong when brought in by truck or ship for transport onward overseas, although air transshipment cargo and transit cargo that stay on a plane or ship are exempt.

Tong worried that the reverse would create a “loophole” where alternative tobacco products would slip to the community.

November 6, 2022

PMI Wins Elliott Support for Swedish Match Bid

Elliott Management Corp. has decided to back Philip Morris International’s bid for Swedish Match, reports the Financial Times.

By the Nov. 4 acceptance deadline, the multinational’s offer had received more than 80 percent shareholder acceptance.

In May, PMI bid about $16 billion for Swedish Match. Swedish Match’s board of directors recommended shareholders accept the offer, but some investors, including Elliott Management Corp., objected, saying the bid undervalues their firm.

In October, PMI increased the price of its bid to SEK116 per share from the SEK106 per share offered in May. Swedish Match’s board of directors advised shareholders to accept PMI’s revised offer.

Earlier this week, Framtiden Partnerships said it would not accept PMI’s sweetened offer, according to Reuters.

In a white paper, the investor, which owns nearly 1 percent of the Swedish nicotine products manufacturer, explained it believes Swedish Match is better off as an independent company.

PMI’s bid has won approval from regulators in the EU, Brazil and the United States.

November 6, 2022

Activists Demand Removal of Cigarettes From Dutch Stores

Anti-smoking activists have demanded the removal of all cigarettes from Dutch store shelves following a court ruling on emissions, reports Dutch News.

On Nov. 4, judges in Rotterdam said there are “strong indications” that filter cigarettes on sale in the Netherlands may break EU limits on tar, nicotine and carbon monoxide.

The ruling gives the Dutch food and product safety board, NVWA, six weeks to start ensuring that the law is followed properly and that cigarettes do not exceed EU limits.

Tests carried out by the RIVM public health institute in 2018 showed the amount of tar in a cigarette can be up to 26 times the official norm and that nicotine and carbon monoxide levels are also too high in most brands.

In its tests, the RIVM covered the ventilation holes in the filter paper, a method that experts say more accurately mimics the way consumers smoke their cigarettes than the prevailing methods, which leave the ventilation holes uncovered.

Until the European Commission comes up with a measurement method that accurately reflects the emissions that smokers are inhaling, there is no guarantee that the filter cigarettes sold in the Netherlands comply with the directives, the Rotterdam court said.

Wanda de Kanter of the anti-youth smoking body Stichting Rookpreventie Jeugd said the ruling effectively ended the use of fraudulent measurements for emissions of tar, nicotine and carbon monoxide. “This has enabled the tobacco industry to make and keep people addicted for years, but the ruling makes it clear this practice cannot last,” she said.

“The NVWA must immediately remove all cigarettes from the shelves.”

November 5, 2022

KT&G Announces Share Buyback

KT&G plans to buy back KRW350 billion ($245.1 million) of its own shares to boost shareholder returns, reports The Korea Herald.

The firm is also considering increasing dividends per share by more than KRW200.

In November 2021, KT&G announced it would carry out a shareholder return package worth KRW2.8 trillion over the next three years, including a KRW1.8 trillion dividends payout.

Last year, the company bought back KRW350 billion of its shares and paid dividends of some KRW576 billion to shareholders.

In the third quarter, KT&G posted record sales of KRW1.62 trillion, an 8.5 percent increase compared to the comparable 2021 period, mostly driven by growth in noncombustible cigarette sales and overseas business.

“We plan to take a leap forward as a global leading company based on the heated-tobacco and health supplement business, including ginseng, ESG and compliance management,” KT&G General Director Bang Kyung-man was quoted as saying by The Korea Herald.

KT&G exports cigarette products to 124 countries and has offices in the U.S., China, Russia, Turkey, Taiwan and Indonesia.

November 4, 2022

Zimbabwe: More Than 12,500 Ha of Tobacco Planted

Zimbabwean tobacco growers have planted 2,107 ha of dryland tobacco to date this season, reports The Herald, citing data from the Tobacco Industry and Marketing Board (TIMB).

According to TIMB spokesperson Chelesani Tsarwe, 133,724 farmers have registered to grow tobacco this season compared to 111,063 during the same period last year.

Zimbabwe Commercial Farmers Union President Shadreck Makombe told The Herald that tobacco planting was progressing well.

“Dry land tobacco farmers have started planting especially in those areas where the rains fell,” he said. “We will see planting activities intensifying, especially as we go forward from next week onward.”

The area put under irrigated tobacco was 10,483 ha as of Nov. 1, bringing the total hectarage under tobacco to 12,590 ha.

Despite efforts to diversify into other products, tobacco remains one of Zimbabwe’s greatest generators of foreign currency.

During the 2022 tobacco marketing season, Zimbabwe earned USD650 million from tobacco sales, up from USD589 million the previous year.

November 4, 2022

KAC Solicits Scholarship Applications

Knowledge-Action-Change (KAC), with the support of a grant from the Foundation for a Smoke-Free World, is looking for the sixth cohort of scholars for its Tobacco Harm Reduction Scholarship Program (THRSP).

The application period closes on Nov. 30. Successful candidates will receive a 12-month bespoke mentoring program to undertake a THR-related project of their own design plus $10,000 in financial support. On completion of the scholarship, graduates of the THRSP potentially have access to up to a further three years of funded support from KAC.

The THRSP was launched to increase research and practice capacity in tobacco harm reduction in target locations and populations where current activities and resources are limited. The THRSP has a particular focus on low-income and middle-income countries (LMICs), where the need for new approaches to tobacco-related harms are especially acute. It aims to introduce new thinkers, new ideas and new methods to tobacco harm reduction as well as increasing the use of social media and new technologies to disseminate accurate information about the potential for safer nicotine products to reduce the global number of smoking-related deaths, which currently total 8 million every year.

The THRSP achieves its goals in a number of ways. Applicants to the program must devise a project that will improve understanding of, or communication about, tobacco harm reduction appropriate for their country, region or personal area of expertise. Current and former scholars have published original research in peer-reviewed scientific journals, created national and international tobacco harm reduction networks, developed toolkits for smoking cessation or healthcare practitioners, and produced new media resources ranging from articles and films to radio shows and podcasts.

“The impact of the program to date has been immense,” said THRSP manager Jon Derricott. “It has helped to shape and challenge thinking, practice and policy in many areas of the world, particularly in LMICs. The biggest influence is yet to come to full fruition, but this will be a growing cohort of well-informed and highly capable THR professionals who will continue to speak up for the benefits of THR and robustly challenge misinformation wherever it occurs. This really matters because at the root of all this is people’s right to a healthy life, even if they continue to use nicotine. THR enables that goal to be an attainable reality.”

“Being part of the THRSP as a scholar, a mentor and then becoming the THR scholarship manager has been a life-changing journey,” said Chimwemwe Ngoma, a graduate of the program from Malawi. “The THRSP has opened new and exciting doors for me, and I am confident that many people have also benefited through what I have been able to offer. This has been the biggest opportunity for me to give back to the community and impact lives.”

For more information about the program, visit https://thrsp.net.

November 4, 2022