Marlboro maker goes hostile in £1bn battle for inhaler maker Vectura
A battle between Big Tobacco and private equity over Vectura has intensified after the maker of Marlboro cigarettes launched a £1bn hostile bid for the Cotswolds drugmaker.
Philip Morris International (PMI), the world’s biggest cigarette company, threw down the gauntlet to investment giant Carlyle on Sunday with a 165p-a-share offer for the FTSE 250 firm that provides medicines to treat smoking-related diseases.
The offer trumps a 155p-a-share bid by Carlyle just 48 hours earlier, but has not been recommended by Vectura's board - unlike the Carlyle proposal.
Philip Morris, which has been heavily criticised by anti-smoking campaigners for trying to buy Vectura, issued a thinly veiled attack on its private equity rival alongside its latest approach.
Preying on the narrative that many private equity funds hold portfolio companies for between five and seven years, Philip Morris said: “PMI’s business model and strategy is driven by a long-term commitment to the transformation of its business and not a search for short term gains and efficiency.
Meanwhile, the Swiss-headquartered company said it would acquire Vectura using its own cash reserves. Carlyle has pledged to contribute about £600m in equity with some £400m funding from debt provided by Royal Bank of Canada, according to filings.
The board of Vectura, led by chairman Bruno Angelici, a 20-year AstraZeneca veteran, recommended shareholders support the Carlyle bid of 155p on Friday. The directors originally agreed to a 136p approach in May, but switched their allegiance to Philip Morris last month when it offered 150p a share.
Anti-smoking campaigners accused the Marlboro cigarette maker of “buying into the heart of the pharmaceutical industry” and urged the Government to intervene and block the deal.
In returning to supporting Carlyle on Friday, the Vectura bosses signalled that the criticism had played its part in them changing their minds.
The directors noted "the reported uncertainties relating to the impact on Vectura's wider stakeholders" in relation to the prospect of being owned by Philip Morris.
Carlyle’s offer also comes with the support of shareholders controlling stakes totalling 11.2pc including French investment firm Axa, Berry Street Capital and TIG Advisors.
The Telegraph reported last Wednesday that TIG, one of Wall Street’s oldest hedge funds, had bought a £50m stake in Vectura through a complex derivative deal.
It will require the support of 75pc of voting investors for the deal to go through.
Vectura did not respond to a request for comment and Carlyle declined to comment.
Bosses at Philip Morris insisted the Vectura deal was part of its goal to become a “wellness company” and stated ambition in “delivering a smoke-free future”.
The Big Tobacco group of companies - Philip Morris, British American Tobacco, Imperial Brands, Japan Tobacco International and Altria - are all seeking to diversify away from cigarettes. Alongside vaping and heated tobacco products, the quintet are looking at oral nicotine pouches and cannabis.
Philip Morris has made the boldest claims, however. André Calantzopoulos, chairman, told The Telegraph last month: “We can see the world without cigarettes. And actually, the sooner it happens, the better it is for everyone.”
Backing a cigarette ban in as little as 10 years time, he added: “Deadlines are important at a certain stage so people [companies] know how much horizon they have. It is not different from what [is being done] with alternative energies or with electric cars ... [but you need to] stop the confusion that currently exists in the minds of smokers.”
British American Tobacco, arguably the next more progressive in terms of its diversification plans, disagreed.
Its chief executive, Jack Bowles, said that an outright ban would not work, citing the example of South Africa where smoking was banned last year during the pandemic. “Consumption did not reduce one bit - and everything becomes illicit,” he said.
