Pipe News

Two Luxury Tobacco Giants Talk Merger

If you smoke Stanwell Pipes, or Erinmore, Clan, W.Ø. Larsen or CAO pipe tobacco, you may not know that they all come from the same parent company, Scandinavian Tobacco Group A/S.

STG has signed a letter of intent with Swedish Match to form a worldwide company with focus on cigars and pipe tobacco.

In addition to many of the top cigar brands, Swedish Match also makes Borkum Riff and Half&Half pipe tobaccos.

• Scandinavian Tobacco Group (STG) – formerly named Skandinavisk Tobakskompagni – will contribute all its tobacco business (cigars, pipe tobacco and fine cut tobacco)
• Swedish Match (SM) will contribute all its cigar business (with the exception of US mass market cigars), as well as its pipe tobacco and accessories business
• Completion of the transaction is subject to due diligence by both parties, final transaction agreements, bondholder approval, and regulatory review and approval

In accordance with its strategic vision to become a world leader in cigars and a leading player in smoking tobacco, STG has signed a letter of intent with SM to form a company combining the tobacco business of STG with the cigars businesses of SM (with the exception of SM’s US mass market cigar business). The company will also include the pipe tobacco and accessories business of SM, as well as distribution of lighters and matches in relevant markets.

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The combined entity will have an annual turnover of just under MEUR 700 and a combined volume of more than 2.5 billion cigars and 1,650 tons of pipe tobacco, placing it firmly as one of the largest cigar companies in the world and as world leader in pipe tobacco. The company will have leading positions in the markets for premium cigars in the US and for cigars in Europe, and hold strong positions in a number of other markets. Its leading cigar brands will include brands such as Café Crème, Henri Wintermans, Colts and Mercator, among others, from STG, with SM contributing brands such as Macanudo, Partagas (US), Punch (US) and La Paz. Its leading pipe tobacco brands will include Erinmore, Clan and W.Ø. Larsen from STG and Borkum Riff and Half&Half from SM.

STG will hold 51% of the shares in the new company, with the remaining 49% of the shares being held by SM. On the basis of the preliminary valuations, which are subject to due diligence by both parties, STG will compensate SM by approximately MEUR 40 to account for the planned shareholding and the relative differences in enterprise values on a debt and cash free basis. Anders Colding Friis, CEO of STG, will become CEO of the new company.

SM produces and sells market-leading brands in smoke-free tobacco products, cigars, lighters and matches. SM’s global operations generated sales of MSEK 14,139 for the twelve months period ending September 30, 2009. It has production units in 10 countries and the SM share is listed on the NASDAQ OMX in Stockholm.

"The Letter of Intent marks the intention of both parties to form a value enhancing business combination within the cigar and smoking tobacco industry. Such a business combination would be complementary, create synergies and result in an overall stronger company," says Anders Colding Friis, CEO of Scandinavian Tobacco Group.

Completion of the transaction is subject to due diligence by both parties, final transaction agreements, as well as bondholder and regulatory approvals. Signing is expected during the first half of 2010 and completion as soon as possible thereafter. Please note that there can be no assurance that the transaction will be completed.

Scandinavian Tobacco Group produces and sells cigars, pipe tobacco and fine cut tobacco in more than 115 countries around the world. The group has around 3,400 employees and is headquartered in Denmark. The products are sold via sales subsidiaries in Europe, Canada and the US and a network of distributors. Production facilities are located in Denmark, the Netherlands, Belgium, Indonesia, Dominican Republic, Honduras and Nicaragua. Key cigar brands are Café Crème, Henri Wintermans, Colts and Mercator. The most important pipe tobacco brands are Erinmore, Clan, W.Ø. Larsen and Stanwell. Key fine cut brands are Escort, Tiedemanns and Crossroad.

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      maxpeters
    • February 4, 2010
    I'm not sure I like the idea of so much of the tobacco production these companys will be responsible for, being under one roof.
    For one thing, it makes it easier for the anti-tobacco forces to target, and effect drastic changes if they can intimidate the company's leadership.
    For another, most companies, sooner of later, listen to it's accountants over it's production floor people.
    Corners start to be cut, and promotions start to be based on increasing the bottom line, quality control be damned.
    I don't know. I just have a bad feeling here. I prefer the tobacco industry be a little more \spread out\, for lack of a better word.
  • D
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      dunendain
    • February 6, 2010
    I like the idea. If some those companies don't merge, they simply fold, and their blends are gone forever.
  • J
    • J
      josephus656
    • February 10, 2010
    Like it or not much is gone in the way of merger whither to save a company and it's employees or simply to increase wealth or productivity. Sometimes they fold anyway or the products decrease in quality or value. We maybe embarking on a grow your own time again in this bacca world of ups and downs ins and outs, government control lobbist posturing, whatever the times bring and bare just enjoy it while we can.
  • M
    • M
      marbella
    • February 13, 2010
    The history of tabacco has its ups and downs and it looks like some? people are pushing it to the downside with statistics and logical thought.
    I quote Mark Twains article circa 1893
    Mark Twain on Nicotine Nannies
    The Moral Statistician
    Originally published in Sketches, Old and New, 1893
    I don't want any of your statistics; I took your whole batch and lit my pipe with it.
    etc etc etc
    Lets hope and act to make them?! understand many things about life
    NO 1 LIFE IS SHORT -the galaxy is aprox. 4,5 billion years old and we live only +-75years.
    NO 2 HOW LONG IS ONE LIFE?!ONE LIFE IS ONE BREATH! beacuse if you dont have a second breath etc. YOU DEAD!!!!!!
    NO 3 PHILOSOPHISE AND TRY TO UNDERSTAND LIFE
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