FYI: Swedish Match buys Cigars International!

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Originally Posted by CigarCyclopedia

Los Angeles, August 20 – Have you ever seen an ad for an item that jogs you into action?

Maybe a sale on your favorite watch or that briefcase you’ve always wanted? That is more or less how Swedish Match’s agreement to purchase retailer Cigars International came about.

“We had the idea for some time, but never really acted,” said Swedish Match Executive Vice President and chief of North American Operations Lennart Freeman. “Then, Cigars International came on the market, so we had to hurry up our thinking; it kind of made up our minds we should participate in a growing part in the cigar category.”

With annual sales of about $58 million last year and about 100 employees, Cigars International was certainly a tempting target, and it was definitely for sale. Investment advisors Harris Williams & Co. circulated a brief on the company in April, reviving interest inside Swedish Match in extending its reach within the cigar trade in the U.S., the world’s largest cigar market, into the retail sector.

Said Freeman, “We’re committed to be in the category and to be one of the largest cigar companies in the world. Cigars International has a very good track record and very good people.” So after some due diligence work and a little haggling over the terms, the deal was announced last week.

Freeman, however, was quick to caution that for both Swedish Match and for Cigars International, business would continue as usual. Asked if other U.S. retailers would see a change in distribution now that Swedish Match will have its own retail channel, Freeman said no. “It is very important to maintain integrity and we need to serve everybody in the business as well as we can. Cigars International is quite important to us, but it is one customer.”

Freeman said it was too early to speculate on whether specific Swedish Match products or brands would be developed for sale by Cigars International. The deal should close within 4-6 weeks after filings with the Swedish stock exchange and securities authorities.

So, what will Swedish Match buy next? There are lots of rumors, but “there is nothing that is happening” right now said Freeman. Swedish’s cigar manufacturing portfolio is extraordinarily strong in the Dominican Republic and in Honduras, so perhaps a Nicaraguan-based cigar maker might be on the menu. There are several to choose from and General’s name has been linked to actual and/or rumored discussions with many manufacturers, including Padron Cigars and Drew Estates.

The sale also brings into question what moves other larger manufacturers might make vis-a-vis the remaining large national retailers such as Famous Smoke Shop, Mike’s Cigars and Holt’s. Anyone need some quality distribution at retail out there?