EU approves Philip Morris buyout of Swedish Match

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The research and development campus of Philip Morris International, in Neuchatel, western Switzerland. (FABRICE COFFRINI/AFP via Getty Images/File Photo)

The EU commission on Tuesday approved Philip Morris International’s (PMI) purchase of smokeless tobacco company Swedish Match, after the Marlboro cigarette maker agreed to sell off a tobacco distribution business in Sweden.

With the green light from Brussels, Philip Morris passed a key hurdle as the US group looks to steer away from its traditional cigarette business.

To secure the $16 billion (£14bn) deal, PMI offered to divest SMD Logistics, an arm of Swedish Match that gave it “a de facto monopoly on distribution of tobacco and nicotine products in Sweden,” the EU’s antitrust enforcer said in a statement.

The transaction is not yet final, and Philip Morris increased its offer for Swedish Match on October 20 in order to win over investor holdouts.

Stockholm-based Swedish Match derives more than 65 percent of its revenue from smoke-free products, including chewing tobacco and the Zyn brand of nicotine pouches.

The group is also known for making cigars and “snus”, a form of snuff particular to Nordic countries.

PMI announced in 2016 a long-term goal to stop selling cigarettes and replace them with alternatives that it says are less harmful.

The US company sells cigarette brands such as Marlboro and Chesterfield in 180 markets outside the United States and has invested billions of dollars since 2008 in vapour products, oral nicotine and other “reduced-risk” products.

Last year it clinched a controversial takeover of British breathing inhaler manufacturer Vectura, despite fierce opposition from health campaigners and medical groups.

The Philip Morris group plans to generate at least $1 billion in annual net revenues from nicotine-free products by 2025.