Agreement on New Cigar Company Signed

Source from:  Tobacco Reporter 04/27/2010

Swedish Match and Scandinavian Tobacco Group (STG) have signed an agreement to form a new cigar-focused company, a move that was foreshadowed in a January 15 announcement from the companies. "Swedish Match will contribute its entire cigar business with the exception of US mass market cigars, and will contribute its remaining pipe tobacco and accessories businesses," Swedish Match said in a note posted on its website. "STG will transfer all of its tobacco businesses (cigars, pipe tobacco and fine cut tobacco) into the new company. The new company will also include distribution of lighters and matches supplied by Swedish Match in relevant markets." The transaction, which is subject to competition authority approvals, is expected to be finalized during the third quarter of this year. "This is a major step towards our ambition to leverage our combined skills in the global cigar and pipe tobacco industry," said Lars Dahlgren, president and CEO of Swedish Match AB. "By creating this value enhancing business platform with worldwide reach, we are better positioned to drive growth, profitability and long term shareholder value." According to the note, Swedish Match will hold 49 per cent of the shares in the new company, while STG's shareholders will hold 51 per cent. "Jørgen Tandrup, currently chairman of STG, will become the chairman of the board of the new company, and Conny Karlsson, chairman of the board of Swedish Match, will be deputy chairman of the new company. Anders Colding-Friis, CEO of STG, will be the CEO of the new company," the note said. "STG will compensate Swedish Match with €30 million to account for the shareholding and the relative differences in enterprise values on a cash and debt free basis," the note continued. "The cash consideration has been adjusted for exclusion of Swedish Match's minority stake in Arnold André from the transaction." "Based on the Swedish Match and STG 2009 full year results, the new company would have had an annual turnover of approximately €690 million, EBITDA of approximately €140 million, and a volume of more than 2.5 billion cigars." Enditem