Marie Mannes and Anna Ringstrom

STOCKHOLM, (Reuters) – Shares in Swedish Match surged Tuesday following the announcement by Philip Morris International Inc (NYSE) that it is in negotiations to acquire Stockholm’s tobacco products company. This was in response to a growing market looking for alternative to cigarettes.

After the Stockholm stock exchange closed Monday, the two companies released separate statements, confirmating media reports and stating that it was not clear if an offer would ever be made.

Swedish Match makes the majority of its profits from Swedish-style tobacco snuff, “snus”, but Zyn, a relatively new product that is free of nicotine and contains no tobacco, is expanding rapidly in Scandinavia as well as the United States.

Company shares rose to records during early trade and were up 24% as of 0912 GMT.

Alastair Mankin (Vice President at Cowen) stated that “The acquisition Swedish Match would align extremely well with PM’s strategic goals and would have an extremely straightforward route to regulatory approval.”

Altria (NYSE) and BATS would be able to compete, but this wouldn’t apply.”

Marlboro Cigarette maker Philip Morris closed Monday with a 1% gain. This is despite growing scrutiny from the world about traditional cigarettes.

In a note to clients, Jefferies analysts stated that “Strategically we believe this makes a lot more sense.” The PMI would be able to take a leadership position in European smokers, as well as giving distribution in America for its broader RRP (reduced risks products) program.

Jefferies analysts stated that they wouldn’t rule out the possibility of a counter-bid from Sweden for the group.

Swedish Match’s Smokefree section, which contains snus or Zyn in addition to snus, made up around half of all group sales. In 2021 it was 12 billion crowns ($1.2 Billion). Cigars made up a quarter.

March saw the company halt plans to sell and list its U.S.-based cigar business. It was its second-largest segment, after snus. The company’s products include chewing tobacco and U.S.-style moist cigarettes, lighters, matches, and lighters.

According to Swedish Match’s website, the United States is home to the largest player in chewing tobacco and nicotine pouch markets. It also holds the third position in moist snuff. Swedish Match, the number one market player in snus products, is second for nicotine pouches.

SEB analysts stated in a note sent to clients, that Altria rivals Altria’s BAT (LON), according to SEB. Japan Tobacco Swedish Match (OTC:), or even an investment group could all be interested in purchasing Swedish Match, or parts thereof.

Swedish Match would sell the cigars section to make it exit the segment of combustible tobacco products. The company had already closed its cigarette business back in 1999. The health risks of using snus are being debated by researchers.

Swedish Match reports first-quarter results this Wednesday.

($1 = 10.0416 Swedish crowns