Philip Morris to buy South Africa snuff maker

RICHMOND, Va. - Philip Morris International, maker of Marlboro and other cigarettes for sale overseas, has agreed to buy a Swedish company's South African snuff and pipe tobacco operations for 1.75 billion South African rand, or roughly $222 million.

Philip Morris International Inc. estimated that Swedish Match South Africa Ltd.'s pipe tobacco and snuff products account for about 31 percent of total tobacco consumption in South Africa. The brands involved in the deal, announced Thursday, include Boxer, Best Blend and Taxi.

Swedish Match South Africa reported sales of 687 million South African rand, or roughly $88 million, last year.

The deal "represents an excellent strategic fit for our business in South Africa," Jean-Claude Kunz, president of Philip Morris' Eastern Europe, Middle East and Africa region, said in a statement.

Philip Morris, the world's largest non-governmental cigarette seller, like other tobacco companies, hopes to boost sales of smokeless tobacco products to offset decreased demand for cigarettes because of concerns about health, smoking bans and price increases.

In February, Philip Morris announced a 50-50 joint venture with parent Swedish Match AB to make and sell smokeless products like snus — teabag-like pouches that users stick between their cheek and gum.

Philip Morris said it expects to complete the acquisition by the end of the fourth quarter, following approval by South African regulators. In a statement, Philip Morris predicted the deal will be "immediately marginally accretive" to its earnings per share.

Philip Morris International, with offices in New York and Lausanne, Switzerland, was spun off from Richmond, Va.-based Altria Group Inc., the seller of Marlboro and other Philip Morris brands in the U.S., in March 2008. It is smaller only than state-controlled China National Tobacco Corp.

"This agreement with Philip Morris International is in line with Swedish Match's strategy to focus on smoke-free tobacco, cigars and lights products," Swedish Match President and CEO Lars Dahlgren said in a statement.

Swedish Match South Africa will continue to distribute lighters, matches and cigars for Swedish Match, the company said. Swedish Match AB produces market-leading smoke-free tobacco products, cigars, pipe tobacco around the world.

Shares of Philip Morris fell 47 cents, or 1.1 percent, to $43.62 in early trading Thursday.

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