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Protean Rejects Swedish Match Offer as Too Low

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Stockholm (HedgeNordic) – Protean Select, a newly-launched Swedish hedge fund founded and managed by Pontus Dackmo and Carl Gustafsson, does not plan on accepting Philip Morris International’s current offer of SEK 106 a share to buy Swedish smokeless tobacco maker Swedish Match. “One of the foremost Swedish quality companies, founded in 1915, risks leaving the stock exchange far too cheaply,” writes Dackmo in a letter to investors.

“One of the foremost Swedish quality companies, founded in 1915, risks leaving the stock exchange far too cheaply.”

Marlboro-maker Philip Morris International announced an all-cash offer for Swedish Match of SEK 106 per share back in May, valuing the Stockholm-based tobacco and nicotine products maker at SEK 161.2 billion. Although the offer represents a premium of 31.7 percent compared to the volume-weighted average trading price during the 30 trading days through the last day of trading prior to the announcement, several Swedish Match shareholders, such as hedge fund Bronte Capital, called the offer “unacceptable.” Activist investor Elliott Investment Management has been building a stake in Swedish Match in an attempt to oppose the transaction under the current terms. Under Swedish law, 90 percent of shareholders would need to accept the offer to enable Philip Morris International to acquire Swedish Match in its entirety.

Protean Select, which has close to ten percent of its portfolio invested in Swedish Match, believes “106 SEK undervalues Swedish Match” and does not intend to accept the current offer from Philip Morris International. “We believe the long-term upside is multiples of this, and a long-term investor should welcome a dip as a buying opportunity,” writes Dackmo in a letter where he discusses the possibility of Swedish Match’s share price declining materially if Philip Morris decides to walk away from the deal.

“It is regrettable that Protean Select is the only Swedish fund to our knowledge willing and able to take this fight.”

“It is regrettable that Protean Select is the only Swedish fund to our knowledge willing and able to take this fight,” says Dackmo. “We are obviously aware our statement does not move the needle for the outcome of the bid, given the size of our holding,” he continues. “But we believe we owe it to ourselves and you, our investors, to be transparent that we are making an active and considered decision.”

“…the current SEK 106 bid undervalues the long-term prospects for Swedish Match by a wide margin, and by rejecting the bid we stand to potentially capture a material long-term upside.”

Dackmo goes on to emphasize that their analysis “indicates the current SEK 106 bid undervalues the long-term prospects for Swedish Match by a wide margin, and by rejecting the bid we stand to potentially capture a material long-term upside.” The co-founder and co-manager of Protean Select says the duo is “equally happy to sell our stake at a reasonable price.”

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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