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CONSUMER STAPLES: Philip Morris; may sell Cigar business

CONSUMER STAPLES
USBulletCredit BulletsNorth America

(PM; A2/ A-/A Neg) 

  • Leaks are PM may sell its cigar business and is looking for $1b+ (bbg).
  • The exposure was inherited from its 2022 acquisition of Swedish Match - the co had small 20%/~$0.5b in Cigar. In FY23 that was eqv. to ~1.4% of PM's revenues.
  • PM already runs market leading 40% exposure to non-combustibles but looks like it is keen to accelerate that. Over FY24, cigar volumes fell -11% but gross profits still grew MSD.
  • A large cigar operator in the US is Scandi Tobacco but a $1b acquisition would be sizeable for it (EV of $2.2b itself). If debt funded it would be enough for a push into HY and trigger a 1.25% step (interest dates in early September, annual).
  • Altria is another potential acquirer - would not be a mover for credit if it does.

PM equities continue trading at all time highs. Not much wrong the co can do.

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(PM; A2/ A-/A Neg) 

  • Leaks are PM may sell its cigar business and is looking for $1b+ (bbg).
  • The exposure was inherited from its 2022 acquisition of Swedish Match - the co had small 20%/~$0.5b in Cigar. In FY23 that was eqv. to ~1.4% of PM's revenues.
  • PM already runs market leading 40% exposure to non-combustibles but looks like it is keen to accelerate that. Over FY24, cigar volumes fell -11% but gross profits still grew MSD.
  • A large cigar operator in the US is Scandi Tobacco but a $1b acquisition would be sizeable for it (EV of $2.2b itself). If debt funded it would be enough for a push into HY and trigger a 1.25% step (interest dates in early September, annual).
  • Altria is another potential acquirer - would not be a mover for credit if it does.

PM equities continue trading at all time highs. Not much wrong the co can do.