KT&G seeks $200 mn acquisition of Nordic nicotine pouch maker

KT&G Corp. is in talks to acquire a leading nicotine pouch company in Northern Europe for about 300 billion won, or  $200 million, investment banking sources said on Monday.

The move comes as South Korea’s dominant tobacco and ginseng producer is exploring new growth drivers amid tightening regulations and a shrinking traditional cigarette market.

If completed, the deal would mark KT&G’s first overseas M&A since it acquired a 60% stake in Indonesian tobacco maker Trisakti Purwosari Makmur in 2011 for about 140 billion won.

KT&G declined to comment on the acquisition talks, saying no decision has been finalized.

Nicotine pouches are smokeless, oral tobacco products placed between the gum and upper lip, sometimes described as chewing tobacco.

As they are gaining popularity, particularly in the US and Europe, Zyn, the world’s No. 1 nicotine pouch brand, gives rise to terms such as "Zynfluencer" and "Zyndemic" in the US.

KT&G’s M&A bid reflects its strategy to expand into the modern oral nicotine segment and reduce reliance on conventional cigarettes.

At a general shareholder meeting in March, KT&G Chief Executive Bang Kyung-man flagged global M&As, partnerships and in-house product development as key pillars of its growth strategy.

In April, it was said to be seeking to acquire a Japanese ginseng company.

The company has also been scaling down property assets, putting Courtyard Seoul Namdaemun, a four-star hotel operated under the Marriott International brand, up for sale. 

KT&G appears to benchmark global tobacco companies’ expansion into the non-combustible segment through acquisitions, industry watchers said.

In 2022, Philip Morris International forayed into the nicotine pouch market through the purchase of Swedish Match, the maker of Zyn, for $16 billion from Elliott Management and other shareholders.

Philip Morris now claims about 80% of the US nicotine pouch market. Since the acquisition of Swedish Match, Philip Morris’ share price has spiked 80% to $180. 

KT&G activist investor Flashlight Capital Partners had urged the company to emulate global peers such as Philip Morris and accelerate its entry into new segments.

Last year, KT&G rejected FCP's offer to buy its lucrative ginseng business for 1.9 trillion won.

Write to Jun-Ho Cha at chacha@hankyung.com
 


Yeonhee Kim edited this article.