Amidst a chorus of pushback from scientific and health organizations, Philip Morris International’s $1.4 billion offer now has the backing of Vectura Group’s board.
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In a strange twist of irony, a big tobacco company is gunning to acquire a British pharma that specializes in asthma medications.
Amidst a chorus of pushback from scientific and health organizations, Philip Morris International’s $1.4 billion offer now has the backing of Vectura Group’s board. The Marlboro maker outdid private equity group Carlyle in a weeks-long bidding war for Vectura. Carlyle bowed out after their final offer of 155 pence per share was upped by PMI at 165 pence.
Nearly two dozen organizations are begging Vectura’s board to reconsider accepting PMI’s offer for ethical and practical reasons. Their somewhat-scathing letter calls PMI’s “beyond nicotine” strategy disingenuous, citing that the company manufactures over two billion cigarettes a day, marketing globally with youth and targeting low- to middle-income communities.
Vectura manufactures inhaled medications for COPD, asthma and other respiratory illnesses. If the tobacco company acquires the pharmaceutical company, as the health organizations’ position states, “Tobacco companies should not profit from illnesses their products cause.”
“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.”
Meanwhile, Philip Morris said it’s aiming for a smoke-free future. PMI’s end game is to move “beyond nicotine.”
“I want to allow this company to leave smoking behind,” Philip Morris CEO Jacek Olczak said in an interview. “I think in the U.K., 10 years from now maximum, you can completely solve the problem of smoking.”
The tobacco group plans to stop selling its Marlboros in the U.K. within the next ten years, marking the end of a century of sales of the cigarettes on U.K. shelves. The announcement came in support of the U.K. government’s plan, released three years ago, to end smoking in England by 2030. PMI also hopes to change its revenue sources, with a goal of $1 billion in sales from non-nicotine products by 2025.
With this in mind, other investors argue that rejecting PMI’s “fair and reasonable” offer, they’re stripping the company of a chance for change. Additionally, Philip Morris’ financial resources could be a massive benefit to Vectura’s research and development budget.
For the deal to close, PMI needs just over 50% acceptance from shareholders. In lieu of a shareholder meeting, the offer will be open for 21 days, then PMI will have 60 days to satisfy the conditions of acceptance.
In the future, Olczak said of its Marlboro brand in Britain, “It will disappear. The first choice for consumers is they should quit smoking. But if they don’t, the second best choice is to let them switch to the better alternatives.”
PMI’s website touts a vision of a “smoke-free future.”
