Philip Morris Nears Drugmaker Takeover as Board Backs Offer
(Bloomberg) -- Philip Morris International Inc. moved closer to the acquisition of Vectura Group Plc, a maker of asthma drugs, after the company’s board backed the tobacco giant’s 1.02 billion-pound ($1.4 billion) offer over a lower bid from Carlyle Group Inc.
Vectura described Philip Morris’s offer of 165 pence a share as “fair and reasonable,” in a statement Thursday. Carlyle, which offered 155 pence, had maintained that it would be a more suitable parent for a drug company than a seller of cigarettes. Neither can raise its bid further.
Philip Morris will next issue an offer document, followed by a 60-day window for shareholders to accept. Carlyle could, in theory, still bring its lower bid directly to investors. Shares in Vectura rose less than 1% to 164 pence in London trading on Friday.
The drugmaker’s directors recommended Philip Morris’s offer despite a chorus of complaints from scientific organizations and health charities in the run-up to its announcement. The groups questioned the ethics of a tobacco company owning a maker of treatments for illnesses caused or worsened by smoking.
More than 20 organizations, including Asthma UK, the European Lung Foundation and Action on Smoking and Health, signed a letter to Vectura’s board urging it to reconsider its decision for ethical and practical reasons. The European Respiratory Society, another signatory, has warned the deal is likely to be financially harmful to Vectura, as health professionals may avoid prescribing drugs from any company that enriches the tobacco industry.
“We will continue to oppose this dreadful proposed takeover until a final decision is made,” Sarah Woolnough, chief executive officer of Asthma UK and the British Lung Foundation, said in a statement. “We appeal now to Vectura’s shareholders to make the right and ethical choice and say no to Big Tobacco.”
Some investors argue that shunning Philip Morris denies the company -- and really any industry trying to build a better future -- the opportunity for change. The Marlboro maker has said it’s aiming for a smoke-free future and that it needs the expertise Vectura provides to develop new products that can be used in the medical field more quickly. Based in Lausanne, Switzerland, Philip Morris wants to generate at least $1 billion in sales from non-nicotine products by 2025.
Philip Morris and Carlyle declined to comment.
In justifying its decision, Vectura said Thursday that wider stakeholders could benefit from Philip Morris’s financial resources, its intention to increase research and development spending, and its plan to operate the drugmaker as an autonomous unit that will form the backbone of its inhaled therapeutics business.
Investors will weigh those points when they decide whether to take up the offer. Philip Morris needs just over 50% of shareholders to support its purchase, but will be hoping for acceptances much higher than that to take full control.
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