Philip Morris Pivots to a Takeover Offer in Vectura Fight

Philip Morris International Inc. lowered the threshold of shareholder backing needed to succeed with its bid for Vectura Group Plc as it faces off with Carlyle Group Inc. in a rare auction for control of the U.K. asthma drug maker.

By switching to what’s known under U.K. rules as a takeover offer from a scheme of arrangement, Philip Morris will need just over 50% of shareholder acceptances, instead of 75%. The Marlboro maker made the move to improve its chances of sealing the acquisition, it said Tuesday.

Questions have been raised by medical bodies and health charities about whether it’s ethically appropriate for a big tobacco company to own a pharmaceutical firm, especially one that makes drugs to treat illnesses caused by smoking. Carlyle said last week it had already secured the backing of investors holding about 11% of Vectura.

The auction between the cigarette maker and the U.S. buyout firm kicks off after the close of trading Tuesday and could last until Aug. 17. It will determine how much each company is willing to pay for Vectura. However, the highest bidder won’t necessarily win the day as shareholders will have the final word.

Philip Morris on Sunday offered 165 pence a share for Vectura, following Carlyle’s Friday bid of 155 pence. The stock rose as much as 1.2% to 175 pence in London on Tuesday. It’s up 40% this year.

While Vectura has withdrawn its recommendation for the Carlyle offer made on Aug. 6, the company had described it as “well aligned” with its wider stakeholder objectives. It also took note of reports of the possible impact on stakeholders if the company were owned by Philip Morris.

Transformation Plan

For its part, Philip Morris is counting on Vectura to accelerate its transformation into a company less focused on cigarettes and nicotine. Vectura’s expertise will help it develop new products in inhaled therapies faster. Separately, Philip Morris on Monday announced the purchase of OtiTopic, a U.S. respiratory drug developer with an inhalable aspirin treatment for heart attacks in late-stage trials.

Carlyle said at the time of its most recent offer that it has received “irrevocable undertakings in relation to voting in favor” of the acquisition from Vectura shareholders AXA Investment Managers UK, TIG Advisors and Berry Street Capital Management. They represent about 11% of the issued ordinary shares.

All parties have agreed to the terms of the auction which will last as many as five business days. Takeover auctions are rare in the U.K. and the most recent example was earlier in the year during the bidding war for U.K. security firm G4S Plc between suitors Allied Universal Security Services LLC and Garda World Security Corp.

In 2018, Comcast Corp. won the bidding for Sky Plc via an auction process with a $39 billion offer for Europe’s largest satellite broadcaster, staving off rivals 21st Century Fox Inc. and Walt Disney Co.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.