Marlboro maker Philip Morris International Inc on Thursday raised its buyout offer for Swedish Match AB in a last-ditch effort to get shareholder support for its $16 billion move into the fast-growing market for alternatives to cigarettes.
Philip Morris increased its bid by more than 9% to SEK 116 per share and said that the offer was its 'best and final price'.
Swedish Match shares rose 1.5%, but were still SEK 4 short of the offer price, as some investors were holding out for more, given that the total value of the new offer remained unchanged from the original one due to the appreciation in the US currency against the Swedish krona.
The revised bid comes just a day after Philip Morris sealed a $2.7 billion deal with Altria Group Inc to buy the exclusive right to sell IQOS heated tobacco products in the United States.
A Sweetened Bid
Philip Morris made an all-cash offer of SEK 106 per share for Stockholm-based Swedish Match in May. Since then, the company has been under pressure to increase its offer as hedge funds, including Elliott Management Corp, have bolstered their stakes in Swedish Match in anticipation of a sweetened bid.
Bloomberg reported in July that Elliott, which raised its stake in Swedish Match to 7.25% from 5.5% in September, was planning to oppose the deal as it was not in favour of the offer terms, when the bid was first revealed.
A source told Reuters last month that Elliott was also considering taking a seat on the board of the Stockholm-based maker of Zyn nicotine pouches.
John Hempton, co-founder of Sydney-based Bronte Capital that owns 1% of Swedish Match, said he was still not intending to accept the bid, despite the increased offer price.
"It is wonderful news. Philip Morris has announced that they are not waiving the 90% acceptance condition. The deal will fail and Swedish Match will remain an independent company," Hempton said.
By Swedish law, 90% of Swedish Match shareholders need to approve the offer before 4 November.
Shareholder 'Not Impressed'
Pontus Dackmo, CEO of Protean Funds who has 500,000 shares in Swedish Match, said he was still not impressed by the sweetened offer from Philip Morris.
"Let's just say it's silly on an almost biblical scale not to neither compensate for the USD/SEK appreciation since the launch of the bid, nor the ongoing inflation," Dackmo said.
He, however, declined to comment on whether the fund would tender its shares in light of the increased offer.
The company had earlier said it was expecting EU antitrust approval for its Swedish Match bid in late October.
Swedish Match did not immediately respond to Reuters's request for comment on the revised offer.