Swedish Match & Scandinavian Tobacco Group Create Joint Venture

Posted in Cigar News | 4 comments

As many of you might have heard, Swedish Match (owner of General Cigar Co.) and Scandinavian Tobacco Group (owner of C.A.O Cigars) decided to move forward with a joint venture this morning.

Here’s a direct quote from the story, which was published on TradingMarkets.com:

15 January 2010 – Tobacco and matches group Swedish Match AB (STO: SWMA) and Denmark-based Scandinavian Tobacco Group A/S (STG) have signed a letter of intent (LOI) to form a 49/51 joint venture
with focus on cigars, the parties said today.

The new entity will include Swedish Match’s cigar business, with the exception of the US mass-market cigars, as well as its remaining pipe tobacco and accessories operations. STG will contribute all of its tobacco business, including cigars, pipe tobacco and fine-cut tobacco.

Based on preliminary valuations, STG will compensate Swedish Match by some EUR40m to account for the planned shareholding and the relative differences in enterprise value on a debt and cash free basis.

STG’s current CEO Anders Colding Friis will become chief executive of the new company, which will have an annual turnover of some EUR700m and a combined volume of over 2.5 billion cigars and 1,650 tonnes of pipe tobacco.

The new entity will comprise cigar brands such as STG’s Cafe Creme, Henri Wintermans, Colts and Mercator, and Swedish Match’s Macanudo, Partagas, Punch and La Paz. Its pipe tobacco brands will include Erinmore, Clan and W.O.Larsen from STG, and Borkum Riff and Half&Half from Swedish Match.

The transaction is subject to due diligence by both parties, as well as to bondholder and regulatory approvals.

After the joint venture is established, STG will keep its smokeless tobacco and pipes business.

This is big news for the cigar industry, and I will be sure to keep you updated as more news develops.

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