Health firm Vectura faced with choice between Carlyle and Philip Morris

Private equity group confirms its offer – lower than the tobacco firm’s – is final, leaving shareholders with a dilemma

Last modified on Tue 10 Aug 2021 14.36 EDT

Vectura shareholders are to be asked whether they wish to sell the British asthma inhaler maker to a private equity firm for £958m, or collect £44m more by handing it to big tobacco company Philip Morris International.

The Carlyle Group and PMI’s intense bidding war for Vectura, which was founded by academics at Bath University almost 20 years ago, had been due to be decided by an unusual Takeover Panel-run auction beginning on Wednesday.

However, just before the 5pm deadline on Tuesday, Carlyle told Vectura shareholders it had pulled out of the process.

The US private equity firm said its previous £958m offer was “full and fair”. While lower in value than PMI’s £1.02bn bid, Carlyle, said it would be a better steward for the company, its employees and patients than the tobacco firm.

Carlyle also warned that if Vectura was sold to PMI it could be banned from participating in “key scientific forums” after leading doctors and scientists vowed to freeze out Vectura if it fell into the hands of the Marlboro cigarettes manufacturer.

Medics, health charities and politicians had raised serious concerns about prospect of a big tobacco company taking over a firm that makes products that treat conditions caused by smoking. PMI advocates a smoke-free future, but makes about 75% of its revenue by selling cigarettes.

Simon Dingemans, a managing director in Carlyle’s European buyout advisory group and a former finance director at GlaxoSmithKline, said: “Carlyle believes its offer is in the best interests of the business and its stakeholders, including its employees, partners and customers, as well as, most importantly, the patients it serves and helps to provide with effective and accessible medicines.”

Carlyle had offered to buy Vectura at a price of 155p-a-share, compared with PMI’s bid of 165p-a-share. To prevent Vectura falling victim to a prolonged bidding war, the Takeover Panel regulator had organised a five-day auction due to start on Wednesday.

The extremely rare head-to-head auction will now not go ahead. Carlyle said it already had the support of three of Vectura’s largest investors, accounting for 11.2% of the shares. PMI submitted its improved 165p offer over the weekend.

Vectura’s shares, which had risen by 40% since Carlyle’s first bid in May, dropped 5% to 163p following Carlyle’s announcement on Tuesday. In its statement Carlyle said it “always made it clear that it believed its offer provided a full and fair value as well as wider benefits to Vectura and its broader stakeholders”.

Carlyle said its bid would “offer significant opportunity to Vectura’s many employees (particularly Vectura’s leading scientists), suppliers, customers and research partners”.

“In particular, it would allow the company and its employees to continue to participate in key scientific forums and would provide the resources Vectura needs to accelerate its strategy and to continue its vital work helping patients suffering from respiratory illness.”

Malcolm Clark, senior cancer prevention policy manager at Cancer Research UK, said: “It’s clear there’s more at stake in the outcome of this deal than the share price. It’s unethical for big tobacco to be allowed to profit from treating diseases made far more prevalent because of its products.”

Sarah Woolnough, chief executive of Asthma UK and the British Lung Foundation, said: “Every year in the UK, 90,000 people die from conditions such as chronic obstructive pulmonary disease, which are linked to smoking.

“It is unacceptable that companies that have profited from the devastation smoking causes could then make even more money providing treatments for the illnesses they have caused.”

Woolnough and Clark both warned that the company could be blocked from taking part in research programmes with universities if it succumbs to PMI’s advances.

PMI has said it wanted to buy Vectura has part of its vision for a “smoke-free world”, underpinned by a strategy to help cigarette smokers wean themselves off smoking and switch to its alternative products such as e-cigarettes and vapes, which it says are less harmful.

However, the company still makes about three-quarters of its $28bn (£20bn) in annual revenue from “combustible” products that involve the burning of tobacco. It shipped 628.5bn cigarettes last year.

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