Philip Morris raises offer in bidding war for UK inhaler group Vectura

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The battle between the owner of Marlboro cigarettes and a private equity group for control of the UK inhaler maker Vectura intensified on Sunday as Philip Morris International raised its bid to more than £1bn.

PMI’s offer of 165p a share came just two days after Carlyle, the US private equity group, raised its own bid for Wiltshire-based Vectura to 155p a share.

That offer won the backing of Vectura’s board and a group of investors that owns 11.2 per cent of Vectura’s equity, including Axa Investment Managers. The PMI offer values Vectura’s equity at £1.02bn, compared with Carlyle’s £928m.

The bid battle for Vectura comes as private equity launches its biggest raid on listed UK businesses in decades, taking advantage of depressed valuations in the wake of Brexit and the pandemic. The pace of PE bids for London-listed companies was the fastest in 20 years over the first half of this year.

Last Friday, US private equity group Fortress increased its offer for Wm Morrison to nearly £10bn, raising the stakes for control of one of Britain’s biggest supermarket chains.

SoftBank-owned Fortress lifted its bid just days before a critical deadline for a rival offer from the buyout group Clayton, Dubilier & Rice. Under the existing timetable for the Morrisons deal, CD&R has until Monday to decide whether to outbid Fortress or walk away.

In another recent private equity raid, TDR Capital and the billionaire brothers Mohsin and Zuber Issa bought rival supermarket chain Asda from Walmart in a £6.8bn deal. Listed groups, from the infrastructure company John Laing to the power supplier Aggreko, have also been in the industry’s sights.

The latest set of bids in the tussle for Vectura was also accompanied by increasingly sharp rhetoric between the potential buyers.

In a broadside at the private equity model, in which companies are typically sold on again within about five years of acquisition, PMI said its own strategy was “driven by a long-term commitment to the transformation of its business and not a search for short-term gains and efficiency”.

Carlyle had said on Friday, as it made its 155p bid, that Vectura’s directors were aware of “reported uncertainties relating to the impact on Vectura’s wider stakeholders arising as a result of the possibility of the company being owned by PMI”.

PMI’s efforts to acquire Vectura, which develops medicines and devices to help with breathing problems, have been met with criticism from anti-smoking campaigners.

PMI has been trying to diversify into what it calls “beyond nicotine” products, and said on Sunday that buying Vectura would be part of that strategy.

Jacek Olczak, PMI’s chief executive, said last month that the Marlboro cigarette brand would disappear from UK shelves within 10 years.

Vectura’s shares closed at slightly less than 164p on Friday, above the level of Carlyle’s offer, indicating that shareholders may have been expecting the bidding war to continue. The healthcare group generated revenues of £190.6m in 2020, up 7 per cent from the year before.

It is the latest development in a months-long fight between the rival bidders. Carlyle offered 136p a share in May, and PMI made a 150p counterbid last month.

Vectura and Carlyle declined to comment.

The private equity group has been stepping up its own attempts to buy European healthcare companies. Last year it hired former GlaxoSmithKline chief financial officer Simon Dingemans to oversee UK buyouts and healthcare deals across the region.