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BUSINESS

EU approves buyout of Swedish Match tobacco company

The EU commission on Tuesday approved Philip Morris International's purchase of smokeless tobacco company Swedish Match, after the Marlboro cigarette maker agreed to sell off a tobacco distribution business in Sweden.

EU approves buyout of Swedish Match tobacco company
Classic Swedish company Swedish Match may soon become American. Photo: Adam Ihse/TT

With the green light from Brussels, Philip Morris passed a key hurdle as the US group looks to steer away from its traditional cigarette business.

To secure the $16 billion deal, Philip Morris International offered to divest SMD Logistics, an arm of Swedish Match that gave it “a de facto monopoly on distribution of tobacco and nicotine products in Sweden,” the EU’s antitrust enforcer said in a statement.

The transaction is not yet final, and Philip Morris increased its offer for Swedish Match on October 20th in order to win over investor holdouts.

Stockholm-based Swedish Match derives more than 65 percent of its revenue from smoke-free products, including chewing tobacco and the Zyn brand of nicotine pouches.

The group is also known for making cigars and “snus”, a form of snuff particular to Nordic countries.

Philip Morris announced in 2016 a long-term goal to stop selling cigarettes and replace them with alternatives that it says are less harmful.

The US company sells cigarette brands such as Marlboro and Chesterfield in 180 markets outside the United States and has invested billions of dollars since 2008 in vapour products, oral nicotine and other “reduced-risk” products.

Last year it clinched a controversial takeover of British breathing inhaler manufacturer Vectura, despite fierce opposition from health campaigners and medical groups.

The Philip Morris group plans to generate at least $1 billion in annual net revenues from nicotine-free products by 2025.

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BUSINESS

‘I was too ambitious’, says Spotify CEO as tech giant cuts 6 percent of workforce

Spotify founder Daniel Ek said he had been 'too ambitious' as the Swedish streaming giant on Monday announced it is cutting six percent of its approximately 10,000 employees.

'I was too ambitious', says Spotify CEO as tech giant cuts 6 percent of workforce

The company did not specify where the cuts will be made.

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about  six percent across the company,” Spotify chief executive Daniel Ek said on Spotify’s official blog.

“I take full accountability for the moves that got us here today,” Ek added.

The 39-year-old CEO added that over the next several hours “one-on-one conversations will take place with all impacted employees.”

He said HR business partners are working with employees whose immigration status is connected with their employment.

Shares in the Sweden-based company, which is listed on the New York Stock Exchange, rose over 4.5 percent following the announcement in out-of-hours trading.

Spotify has invested heavily since its launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts.

It has invested over a billion dollars into podcasts alone and raised hackles last year as it signed a $100 million multi-year deal with controversial star podcaster Joe Rogan.

The company has never posted a full-year net profit despite its success in the online music market.

In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end on 2022.

It planned to reach 479 million monthly active users by the end of 2022, including 202 million paying subscribers and is targeting one billion users by 2030.

“While I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture,” Ek said.

‘Unsustainable’

To offer perspective, Ek noted that the growth of the company’s operating expenditure had outpaced revenue growth by a factor of two.

“That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap,” Ek said.

The company’s annual turnover reached 9.6 billion euros ($10.4 billion) in 2021.

Reporting its third quarter earnings in October, Spotify said it had 456 million monthly active users, of which 195 million were paying subscribers – who account for the majority of Spotify’s income.

In recent months, tech giants such as Google parent company Alphabet, Facebook-owner Meta, Amazon and Microsoft have announced tens of thousands of job cuts as the sector faces economic headwinds.

On Friday, Alphabet announced it would cut 12,000 positions, just a day after Microsoft announced a cut of 10,000.

The cuts in the tech sector follow a major hiring spree during the height of the coronavirus pandemic when companies scrambled to meet demand as people went online for work, school and entertainment.

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