Oral nicotine pouch maker Swedish Match said sales in the three months through September increased by 5% at constant currencies, below the 9% expected by analysts. Sales in Swedish Match’s cigar and lighter businesses fell 14% and 18%, respectively. Combined, the two units account for around a third of group sales, so they dragged down the overall performance. The bit of the business that PMI is really interested in, Swedish Match’s noncombustibles unit in the U.S., is booming, though.

The tobacco giant, which sells Marlboro cigarettes outside the U.S., recently upped its offer for the company by 9.4% to 116 Swedish kronor, equivalent to $10.60 at recent exchange rates. It has ruled out increasing the price again. 

A few hours after Swedish Match’s results were released, PMI raised the temperature by not lowering the deal’s acceptance threshold before an agreed deadline. To finish the deal, it still needs investors to tender 90% of the shares, which won’t happen: A regulatory filing showed that Elliott Management has raised its stake in Swedish Match from 7.25% to 10.5%. This hands the hedge fund powers that could be very inconvenient for PMI.

Minority shareholders that own more than one-tenth of a Swedish company have the right to request a certain level of dividend payment.

The bidder can still lower the hurdle later. Under Sweden’s takeover rules, it can be reduced even after the offer period has expired. Investors are betting that the tobacco giant wants Swedish Match enough to take this route. The company’s shares are trading just 1.7% below the 116 krona offer price. If they worried PMI might walk away, the stock would be down more, having traded around 80 kronor before the approach. 

PMI wants this deal to happen. The battle to dominate America’s lucrative smokeless tobacco industry is ramping up.

Altria,

which sells Marlboro in the U.S., this week announced a new partnership with

Japan Tobacco

that will eventually see the two companies introduce a heated tobacco product in the U.S.

That said, their track records so far don’t suggest they can come up with a formidable rival to PMI’s IQOS heated tobacco sticks. 

Last week, PMI said it would pay $2.7 billion to buy back the distribution rights for IQOS from Altria. This does give it an independent route into the U.S. market, but nothing can happen until an existing contract between the two tobacco businesses expires in 2024. Getting its hands on Swedish Match in the meantime would help PMI to make faster inroads.

The tobacco company wants to generate more than half its net revenues from noncombustible nicotine products by the middle of the decade, up from around 30% today. Unlocking the U.S. is crucial to get there. Elliott is making life difficult for the cigarette maker, but probably not enough for it to quit.

Write to Carol Ryan at carol.ryan@wsj.com