Hedge Funds May Force PMI to Increase Offer for Swedish Match

According to an article in The Wall Street Journal, a hedge fund may force Philip Morris International to raise its bid for Swedish Match.

On May 11th, PMI made an offer of 16.12 billion Swedish Krona (equivalent to 16.14 billion USD) to acquire Swedish Match. The offer was initially valid until September 30th, 2022, but was later extended to October 21st, 2022, as the bidding process awaited approval from the European Commission. The conditions of the offer require that PMI acquires more than 90% of the listed shares of Swedish Match in Stockholm.

Since the announcement of the deal between the two companies, Elliott Management Corp. has acquired shares in Swedish Match. According to hedge fund manager Massimo Stabilini, based in London at Sinclair Capital, Elliott is attempting to secure a better price from PMI.

Elliott is in need of purchasing nearly $1.6 billion worth of Swedish Match stock in order to prevent Phimou International from reaching 90% ownership. This suggests that Elliott may need additional players to join in on their competitive activity. According to Swedish regulations, if their shares reach 5%, they must also disclose their holdings.

Elliott is not the only shareholder of Swedish match manufacturer seeking better conditions. According to Reuters, earlier this year, shareholder Bronte Capital also opposed the acquisition, stating that the tender offer price was "unacceptable".

These investors are betting that PMI will hesitate rather than outright abandon the deal. The acquisition is aimed at achieving the goal of having more than 50% of Philip Morris International's net revenue come from smoke-free products by 2025, which is higher than last year's 29%.

According to the Wall Street Journal, Elliott had previously expressed a willingness to participate in "long-term game competition". In 2016, it acquired a stake of over 10% in Arcam after General Electric agreed to acquire the Swedish 3D printing company. General Electric later raised its offer and lowered its minimum approval threshold to 75%.

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