Philip Morris and Swedish Match have come to terms on a $16 billion deal.

The business that makes Marlboro cigarettes requested to pay $10.56 per share for the smaller company, according to a statement posted on Wednesday. This is a 40 percent premium over Swedish Match’s Monday closing price. The board of directors in Stockholm urged the company’s stockholders to examine the offer.China 2020 Heat Not Burn Device E-Cigarette 3200mAh Auto-Clean Smoking Iqos  Product - China Heat Not Burn, Vape

As one of the biggest transatlantic agreements of the year, Philip Morris is now entering the extremely competitive market of oral nicotine products with this arrangement with Swedish Match, whose mission statement is “a world without cigarettes.” Chewing tobacco has come a long way in the last several decades. As a result of Russia’s invasion of Ukraine, the company now has a foothold in the lucrative and fast growing market for smoking alternatives in the United States.

Industry-wide pressure to diversify its product offering beyond cigarettes has grown as government rules tighten, and the tobacco industry giant has been leading the charge in achieving this goal. Smoke-free items accounted for almost 30% of the company’s net sales in 2016, up from 0% the year before thanks to a slew of new products and acquisitions.

The IQOS heated-tobacco system was developed by Philip Morris, which last year agreed to buy Vectura Group, a maker of asthma treatments. Aside from these purchases, it bought Fertin Pharma, an aid in quitting the habit, and OtiTopic, a respiratory pharmaceutical business that is now testing an inhalable aspirin treatment for heart attacks.

Philip Morris anticipates that by the year 2025, the company’s net revenues will be dominated by smoke-free products.

For Philip Morris, the deal expands the sale of its lower-risk tobacco products in the United States, according to a Jefferies analyst’s report prepared by Owen Bennett. This puts the corporation in a better position to introduce IQOS or other vaping goods to American customers.

Three times the existing net debt/adjusted profits ratio is expected to be the effect of the transaction, according to Philip Morris. It has put an end to the current three-year share repurchase programme it began in July of last year in preparation for its long-term debt reduction plan.

 

 

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