Tobacco company Swedish Match will challenge the world's largest cigar maker in new joint venture.

Swedish Match, tobacco producer founded in 1917 by the “Match-king” Ivar Kreuger, will form a new global cigar company with Scandinavian Tobacco Group, the company said Friday.

The joint venture will create a company almost as big as the world's largest cigar giant, British Imperial Tobacco.

"This is good for Swedish Match and its stock", a Stockholm-based analyst covering the company stock told The Swedish Wire, adding that the move was not unexpected. "I believe there will be several positive synergies".

Swedish Match rose 4.5 percent in Stockholm on the news.

Swedish Match will contribute all of its cigar business with the exception of U.S. mass market cigars, as well as its remaining pipe tobacco and accessories businesses to the new company.

Scandinavian Tobacco Group, one of Denmark's largest international companies, will contribute all of its tobacco business, such as cigars, pipe tobacco and fine cut tobacco.

Swedish Match is expected to own 49 percent of the new company and Scandinavian Tobacco Group the remaining 51 percent. Completion of the transaction is subject to due diligence by both parties.

Swedish Match's global operations generated sales of 14,139 million kronor ($2 billion) for the twelve month period ending September 30.