In a shocking turn of events, tobacco giant Philip Morris International (PMI) has significantly upped its offer for asthma inhaler maker, Vectura, to fend off competition from private equity group Carlyle. The new offer values Vectura at a whopping 1.02 billion pounds (1.4 billion USD).
First, PMI announced its plan to phase out Marlboro sales in the UK within a decade. In response to this announcement, PMI boosted its bid for Vectura, now offering 1.65 pounds (2.29 USD) per share, valuing the company at 1.65 billion pounds (2.26 billion USD).
The acquisition could help PMI surpass its goal of generating over half of its net revenue from smoke-free products like e-cigarettes and medicines within four years. Currently, around a quarter of its revenue comes from such products. With a presence in over 175 markets, PMI is banking on this shift.
Vectura's technology is already being utilized in medications from pharmaceutical giants like Novartis and GlaxoSmithKline. The company is jointly working with another UK-based firm, Inspira Pharmaceuticals, on developing an inhalation treatment for Covid-19.
PMI intends to run Vectura as a separate business unit, serving as its backbone in the inhalation therapy department.
The tobacco industry is facing numerous challenges, including declining smoking rates, strict regulations, and investors pushing out tabacco products from their portfolios. To combat this, PMI has invested 8 billion USD, hired numerous scientists and technologists, and launched its flagship product, IQOS, which heats tobacco instead of burning it.
Recently, PMI acquired Fertin Pharma, a company that produces oral medications for pain relief, allergies, and various other health conditions.
Health organizations have expressed skepticism towards PMI's plans, fearing that tobacco companies could influence public health policies in the UK. Cancer Research UK urged the British government to block the deal, warning that tobacco companies could profit from asthma, emphysema, and chronic bronchitis treatments.
Two days before PMI updated its offer, Carlyle Group raised its offer for Vectura as well. In response, Vectura recommended Carlyle's offer and raised concerns about PMI's offer, indicating that it might fare better under Carlyle's control. However, Vectura hasn't yet signaled support for PMI's offer.
The British regulatory bodies have stated that the buyout bid will transition into a bidding war if competing offers aren't tabled by Tuesday.
Sources: , goldmansachs.com, .
Enrichment Insights:
PMI's interest in Vectura aligns with the company's push towards smoke-free products and provides an opportunity to collaborate more extensively in the pharmaceutical and medical cannabis sectors. The addition of Vectura's technology can help PMI develop safer nicotine-delivery systems, diversify its business, and strengthen its sustainability strategy.
The acquisition could lead to the development of innovative smoke-free products, such as heat-not-burn devices or inhalers, with potential medical applications. Moreover, it could stimulate research and development in healthcare and wellness, particularly in medical cannabis. Ultimately, the deal could provide opportunities for new revenue streams and create a more integrated tobacco and pharmaceutical industry.
However, acquiring Vectura raises concerns about the potential impact on healthcare and public policy, as tobacco companies could leverage their influence to profit from medical treatments. This could escalate further as other tobacco companies may also consider similar acquisitions in the context of the broader push towards smoke-free products.
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