PMI Moves Closer to U.S. iQOS Distribution As It Ditches Altria and Raises Offer for Swedish Match

Altria, the leading U.S. cigarette manufacturer, and Philip Morris International have reached an agreement under which Altria will forgo the exclusive rights to commercialize iQOS, PMI's heated tobacco brand, in the U.S. from April 2024 in return for payments totaling $2.7 billion. In other news, PMI has increased its offer for Swedish Match to SEK 116 per share, representing a total acquisition value of roughly USD 16 billion. Neither of these events affect our fair value estimates for either company, and we retain our USD 52 and USD 103 per-share valuations of Altria and PMI respectively. While both stocks are around 15% undervalued, we believe PMI is the higher-quality business, with global leadership in the heated tobacco category, and it may unlock value by distributing iQOS in the U.S. through Swedish Match distribution infrastructure.