Carlyle’s Final Vectura Offer Opens Path for Philip Morris
Carlyle Says Vectura Offer Is Final, Short-Circuits Auction
(Bloomberg) -- The battle for Vectura Group Plc may be nearing the final stages after Carlyle Group Inc. said its 958 million-pound ($1.3 billion) offer is final, opening the door for Philip Morris International Inc. to potentially walk off with the U.K. drugmaker.
Carlyle on Tuesday side-stepped a planned auction and described its most recent 155 pence-a-share bid as “full and fair” and in the best interests of “broader stakeholders,” including the scientists who work at the maker of asthma medicines.
The decision gives Philip Morris leeway to stick with its latest offer -- already 10 pence a share higher than Carlyle’s -- or to increase it to nail down backing from shareholders, some of whom may be wary of selling a respiratory drug business to a tobacco firm.
Vectura will wait for Philip Morris to declare its intentions before sharing its views on the bids, the company said in a statement. The cigarette maker has until 5 p.m. on Thursday to improve its offer. Philip Morris declined to comment.
The scene is set for an intriguing conclusion to the takeover fight. Deciding which bid to back could test the environmental, social and governance credentials of Vectura’s directors, shareholders and business partners.
Vectura shares fell less than 1% to 163.20 pence in London trading, below Philip Morris’s 165 pence-a-share offer.
A number of health charities and scientific organizations have already expressed concern about working with Vectura if it’s owned by a cigarette maker. The European Respiratory Society warned the deal could hurt Vectura financially because health professionals will avoid prescribing drugs from a company that enriches the smoking industry. The medical group’s own constitution and bylaws reject any links — even perceived ones — to the tobacco industry.
‘Reprehensible Choice’
The heads of the American Lung Association and the American Thoracic Society have said in a joint statement the surprise swoop on Vectura by Philip Morris was the “latest reprehensible choice from a company that has profited from addicting users to its deadly product.”
In a sign that the maker of Marlboros is aware this takeover may come down to more than just price, it changed the structure of its takeover offer, lowering the threshold of shareholder backing needed to succeed with its bid to more than 50% from 75%.
Vectura previously recommended Carlyle’s proposal and described the firm as “well aligned” with its wider stakeholder objectives. The company also noted some of the concerns about Philip Morris and said the uncertainty over the takeover was affecting the performance of the business.
Even if Philip Morris fails to win a board recommendation, it could take its offer directly to shareholders.
Inhaled Therapeutics
Carlyle said its ownership of Vectura would avoid many of the ethical considerations clouding the Philip Morris bid. Employees could continue to participate in key scientific forums and Carlyle would “provide the resources Vectura needs to accelerate its strategy and to continue its vital work helping patients suffering from respiratory illness,” the buyout firm said Tuesday.
Carlyle, which has the backing of investors holding about 11% of Vectura, aims to speed its expansion as the company transforms into a maker of inhaled therapies for others in the industry.
Philip Morris is betting on Vectura to bolster its growth in inhaled therapeutics as part of a pivot away from cigarettes and nicotine. The tobacco firm’s determination to outmaneuver Carlyle highlights Chief Executive Officer Jacek Olczak’s view that Vectura offers a unique opportunity to reinvent his company. He’s argued that developing new inhaled therapies without the expertise of the U.K. company would take far longer.
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