Any interest Lorillard to acquire Swedish Match - NOT

September 18, 2008 - Altria - UST, Reynolds American - Conwood, Lorillard - Swedish Match - NOT.

Two years ago, RJ Reynolds acquired Conwood LP, the second largest marker of smokeless tobacco products for $3.5 billion. Earlier this month, Altria Group announced the acquisition of UST, the nation’s largest smokeless tobacco products company, for $11.7 billion.

That leaves Swedish Match as the largest remaining independent producer of smokeless products. Analysts suggest that Lorillard Inc., the number three tobacco company in the U.S., would be a logical takeover candidate, reports Reuters. Unlike other potential buyers, Greensboro, N.C.- based Lorillard has a large distribution system in the U.S., where much of Swedish Match’s sales are located.

We doubt if Lorillard would be interested in the market for Swedish Match outside the United States, e.g., the marketing of snus in Scandinavian countries (i.e., Sweden and Norway) and selling Cricket lighters in Russia. Altria has worked to do with UST, they've been losing market share in the smokeless tobacco market for years. Michael E. Szymanczyk - Chairman and Chief Executive Officer at Altria has indicated a little tweaking is necessary for the UST's premium brands - Copenhagen and Skoal to return these brands to some modest share growth. (Altria Group, Inc. Agrees to Acquire UST Inc. - Altria Group and UST Conference Call, Seeking Alpha, 9/10/2008.

As we know, the growth in moist snuff is in the price value/discount brands. The largest brands for Swedish Match on the US market are Timber Wolf and the discount brand Longhorn . By far the greatest growth has come from Reynolds/Conwood's Grizzly. In the second quarter 2008 Grizzly brand accounted for almost half of the industry's total moist snuff growth of 7.7% compared with the previous year's quarter.RAI CEO: 'Solid Quarter Keeps Company on Track', PR Newswire, 7/30/2008) Comparison U.S. Smokeless Tobacco Players: No. 1 UST and No. 2 Conwood..

Swedish Match makes a SNUS product called Triumph for Lorillard. The Lorillard salesman tells us that Triumph SNUS sales have gone poorly and it doesn't cost Lorillard anything to sell this pouch tobacco.

Reference: Could Swedish Match Soon Be in Play? - Analysts are speculating that Swedish Match, which has its North American headquarters in Richmond, may attract a takeover bid by James A. Bacon, richmond.com, 9/17/2008.