Swedish Match and Scandinavian Tobacco Merge to Form Giant Cigar Company

The makers of Macanudo and C.A.O. cigars have come together, creating one of the world’s largest cigar companies. Skandinavisk Holding A/S, headquartered in Søborg, Denmark, and Swedish Match AB of Stockholm, Sweden, have officially merged their cigar and tobacco operations, creating the new Scandinavian Tobacco Group, headquartered in Copenhagen, Denmark.

The new Scandinavian Tobacco Group is the second-largest producer of cigars in the world, making more than 2.5 billion cigars per year (115 million of them by hand), more than 1,650 tons of pipe tobacco and 2,100 tons of fine-cut tobacco. It has annual revenues of nearly 700 million euros ($1 billion), nearly 10,000 employees in 20 countries spread across the globe and production at 17 different sites. Combining such iconic brands as Macanudo, C.A.O. and Dunhill, the non-Cuban versions of Cohiba, La Gloria Cubana, Punch, Hoyo de Monterrey, Partagas, and many others under one organization, the new Scandinavian Tobacco Group claims some 30 percent of the U.S. premium cigar market. It also ranks second in size in the cigar world only to Imperial Tobacco Group PLC of Britain, parent company to Altadis, which controls brands such as Montecristo and H. Upmann and is the 50 percent owner of Cuban cigar monopoly Habanos S.A.

Anders Colding Friis, chief executive officer of Scandinavian Tobacco Group, was named chief executive officer of the new company. “After months of preparations, we are very pleased now to be able to start the integration of the two businesses,” said Friis. “The new Scandinavian Tobacco Group is a truly global company and we have an excellent basis in the combined brand portfolio to grow even further and increase profitability.”

General Cigar’s Dan Carr has been named president of global premium cigar operations, and will report directly to Friis.

The deal, which began in January with a letter of intent, closed on October 1, some four months later than expected.  The new Scandinavian Tobacco is 51 percent owned by Skandinavisk Holding and 49 percent owned by Swedish Match, and combines the cigar, pipe tobacco and fine-cut tobacco business of Scandinavian Tobacco Group with the tobacco assets of Swedish Match, including General Cigar Co., the company’s premium cigar unit, as well as its pipe tobacco and accessories businesses.

The deal includes Swedish Match’s Internet cigar retailer, Cigars International, but does not include the Stockholm company's U.S. mass-market cigar business. Swedish Match will receive about 30 million Euros ($41 million) in cash to compensate for difference in values between the merged assets.

The new company is the world’s No. 1 seller of pipe tobacco, according to Scandinavian Tobacco, with sales in more than 60 countries. Leading pipe tobacco brands include Erinmore, Borkum Riff, Clan, Half and Half, and W.Ø. Larsen. The new company’s machine-made cigar brands include Café Crème and Henri Wintermans.

Swedish Match has owned General Cigar since 2005, and El Credito Cigars (the former parent of La Gloria Cubana) since 1999. Scandinavian Tobacco acquired C.A.O. International Inc. from the Ozgener family in 2007.

Officials from General Cigar Co. had no further comment on the deal at this time. Look for much more information on the merger in the near future.

Note: an earlier version of this story erroneously referred to Cigars International as a unit of General Cigar. The company is a subsidiary of Swedish Match AB.

"Lots of rumors circulating about whether or not (and how) CAO and General will merge at the corporate and/or distribution level. Has there been any official word? Personally I'd like to see CAO maintained as a separate entity. Consolidation can be good for business, but I think consumers win if there's more variety. There are already plenty of consumers who turn their noses up (justified or not) at the big brands to reach for the smaller producers), I'd hate to see yet another innovative brand lose its luster." —October 5, 2010 12:00 PM