Philip Morris pivots to takeover offer for Vectura

Philip Morris International has changed its bid for Vectura Group to a takeover offer, meaning the maker of Marlboros will need a lower level of shareholder support to win the battle for the UK asthma drug maker.

Philip Morris is abandoning the scheme of arrangement to increase the certainty of the acquisition, the company said on Tuesday. The scheme requires 75% shareholder acceptances, whereas a takeover offer only needs more than 50% of investors to vote in favour, under UK takeover rules.

Philip Morris is locked in a takeover battle with private-equity firm Carlyle, and an auction procedure is due to begin on Tuesday that will determine how much each company is willing to pay for Vectura. The highest bidder is not necessarily the winner as shareholders will have the final say.

The switch could help increase Philip Morris’s chances of crossing the necessary threshold to succeed with its bid, even if more shareholders were to emerge that oppose its offer. In recent weeks concerns have been raised by a host of respiratory medicine bodies and health charities about the ethical complications of a big tobacco company owning a pharmaceutical company making drugs that treat many illnesses caused by cigarettes.

Philip Morris on Sunday offered 165p per share for Vectura, after Carlyle’s Friday bid of 155p.

While Vectura has withdrawn its recommendation for the Carlyle offer made on August. 6, the company had described it as “well aligned” with its wider stakeholder objectives. The maker of asthma drugs has also acknowledged reports of uncertainties related to the possible impact on stakeholders if the company were owned by Philip Morris.

Carlyle said at the time of its most recent offer that it has received “irrevocable undertakings in relation to voting in favour” 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 — until August 17 — or until the day neither company makes a revised offer. Takeover auctions are rare in the UK and the most recent example was earlier in the year during the bidding war for UK security firm G4S between suitors Allied Universal Security Services and Garda World Security.

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

Vectura rose as much as 1.2% to 175p in London trading on Tuesday.

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