Suitors go head-to-head in shoot out for Vectura

PHILIP Morris International and a uS private equity behemoth are set to go head-to-head in an auction for british inhaler maker Vectura.

The face-off aims to break a toand-fro takeover battle that has seen the tobacco giant and The Carlyle Group put in multiple offers in a matter of weeks for the Chippenham-based business.

All three companies have agreed that the five-day auction – which will be overseen by the Takeover Panel – is the best way to break the deadlock.

The aim of the auction is to get to the point where Philip Morris and Carlyle have made final offers, which they will not be able to change.

This is the only way to resolve the bidding war, otherwise each firm could, if regulators allowed it, keep leapfrogging one another for many more weeks.

And fears are growing that Vectura could be kept under lengthy siege if the pair are left to continue.

Sky’s takeover in 2018 was settled by a one-day auction process, which resulted in a blockbuster £31bn deal from Comcast.

Vectura has previously warned that business is starting to slow in the wake of the frenzy.

Shares in the FTSE250-listed company rose 5.5pc, or 9p, to 173p, as traders priced in the next stage of the stand-off.

The unusual move comes after Marlboro-maker Philip Morris – known as PMI – made a £1.02bn offer for Vectura on Sunday.

This was just two days after Carlyle offered £928m.

Vectura had backed Carlyle’s latest bid – but decided to withdraw support yesterday and refused to recommend the PMI offer, creating an impasse.

Vectura specialises in making inhalers and nebulisers, but it also helps top drug companies convert their medicines into powders that can be inhaled. Customers include Hikma Pharmaceuticals and Glaxosmithkline.

If PMI or Carlyle puts forward a final offer for Vectura by 5pm today, the auction will not go ahead. but if neither does, the process begins and will last five working days from tomorrow until August 17, or until a day when neither side puts in a new offer.

Each day the companies will announce their latest price to the stock market, so investors will be able to track bids.

When the auction ends, Vectura will be left with two final offers which it will then be able to weigh up. If it decides to recommend one then it will go to a shareholder vote, which needs to win 75pc of the ballot.

The battle has been highly controversial, with many in the City keen for Vectura neither to become victim to yet another private equity swoop nor for a company that treats lung conditions to fall into the hands of big Tobacco.

but PMI boss Jacek olczak said taking over Vectura would help it become a ‘broader health and wellness company’.

The company is aiming to eventually stop selling cigarettes. However, tobacco products still account for 75pc of its sales and its move has triggered outrage from health campaigners, with the british Thoracic Society saying it presents an ‘unresolvable ethical conflict’. The European Respiratory Society said it was ‘very alarmed’.

Carlyle is keen to expand the business and it already has support from 11pc of shareholders for its bid. but private equity firms have a torrid reputation for breaking firms up after just a few years and selling off the pieces. Some observers believe the Vectura board could plump for Carlyle even if PMI puts in a bid that is higher, on the grounds that it is better for the company’s overall long-term interest.

Michael Hewson, chief market analyst at CMC Markets, said: ‘It’s a high-stakes decision for Vectura, with the board coming under fire from some for even considering the bid from tobacco giant Philip Morris. The importance of companies on the front line like Vectura, and its partnership with UK-based Inspira, has become even more important in the context of Covid.’

‘It’s a high-stakes decision for Vectura’