Austria Tabak to Acquire Swedish Match's Cigarette Business.

STOCKHOLM, Sweden--(BUSINESS WIRE)--June 1, 1999--

Swedish Match and Austria Tabak have reached an Agreement to transfer the cigarette business of Swedish Match to Austria Tabak for 4,800 MSEK in cash.

The Agreement is subject to the satisfactory resolution of certain questions of practical and legal nature and appropriate approvals from relevant authorities.

The cigarette business of Swedish Match, with sales of 1.490 MSEK and EBIT of 473 MSEK (rolling 12 months), includes production facilities in Malmo, Sweden, management and marketing functions in Stockholm and a sales-force and in addition a local Estonian operation. In total appr. 500 employees will be subject to the transfer. The main products of Swedish Match's cigarette business are Blend, Right and John Silver. Swedish Match had a 48 % market share in Sweden in 1998.

- "Through the acquisition of Swedish Match's cigarette business,

Austria Tabak will significantly expand its cigarette operations

and thus attain the scale to be increasingly competitive in this

business segment in the fast consolidating European and global

tobacco markets", says Heinz Schiendl, President and Chief

Executive Officer of Austria Tabak. "In expanding into cigarette

markets which Swedish Match serves today, Austria Tabak will look

to use Swedish Match's cigarette business as a platform for the

introduction of selected brands of its own, whilst at the same

time developing and continuing to invest in the existing

established Swedish Match brands".

- "I envisage that key management personnel and the majority of the

employees of Swedish Match's cigarette operations will continue

to be employed subsequent to the transfer of ownership. Further I

envisage that the production facilities in Malmo will continue in

operation, he adds.

- "Today Swedish Match's business strategy focuses mainly on

smokeless tobacco, an area in which we foresee considerable

growth opportunities, particularly for moist snuff, and on

cigars", says Lennart Sunden, President and Chief Executive

Officer of Swedish Match. "The strategic importance of cigarettes

in our product portfolio has diminished in recent years. Our

ambition is to arrive at a sound industrial solution for the

cigarette operations, with a new owner who can provide better

conditions for the long-term development and management of these

operations. Austria Tabak is an ideal choice from that, as well

as many other, aspects", Lennart Sunden concludes. "In addition

we envisage further strategic co-operation in markets outside of

Sweden".

Swedish Match has been advised by Merrill Lynch International and Austria Tabak has been advised by CAIB Investment Bank AG.

Swedish Match is an international group with headquarters in Stockholm, Sweden. The company manufactures a broad range of tobacco products, matches and disposable lighters that are sold in approximately 140 countries. Annual sales in 1998 amounted to approximately MSEK 8,200. Swedish Match is listed on the Stockholm Stock Exchange and on NASDAQ 

Austria Tabak is an international manufacturing and trading group focusing on Austria and Germany. The industrial activities comprise the production and marketing of tobacco products. As a tobacco wholesaler, Austria Tabak has operations in Austria, Germany and Hungary. The two divisions are equally important for the earnings power of the Austria Tabak Group. Annual sales in 1998 amounted to MATS 71.600 . Austria Tabak is listed on the Vienna stock exchange.