The tobacco giant has agreed a 150p per share deal to buy the COVID treatment maker, which focuses on inhaled medicines to treat lung conditions. Philip Morris said the deal was part of an attempt to transform itself into a “wellness company” and shift from its current core business.
Vectura’s board recommended the sale to Philip Morris, which trumps a private deal by American buyout firm Carlyle in May priced at 136p-a-share. It had recommended shareholders accept Carlyle’s offer but withdrew support for the bid after receiving the higher offer from PMI.
“We recognise the material increase in the price offered to shareholders under the acquisition when compared with the Carlyle offer and have accordingly recommended the acquisition to shareholders,” Bruno Angelici, Vectura’s chairman, said.
“The acquisition will provide our people with the opportunity to form the backbone of an autonomous inhaled therapeutic business unit of PMI, helping develop products to improve patients’ lives and address unmet medical needs.”
Philip Morris’ bid represents a 10% improvement on Carlyle's offer and an 11% premium to Vectura’s closing price on Thursday.
Shares in Vectura surged more than 13% in London on the back of the news, amid speculation that further bids may be in the pipeline.
Philip Morris has spent around $8bn (£5.8bn) shifting its business away from tobacco as an increasing number of people kick the habit of smoking.
Philip Morris unveiled its 'Beyond nicotine' strategy in February. The company said it aims to be “predominantly smoke-free” by 2025, when it hopes tobacco revenues will account for less than half of total income. Respiratory drugs are a key area of focus for growth.
Vectura makes inhalers and nebulisers, which allow patients to breathe in medication as a mist, either through a mouthpiece or a mask. It is also exploring inhalation as a way to treat non-respiratory diseases such as pulmonary vascular illnesses, cancer and COVID-19.
“The market for inhaled therapeutics is large and growing rapidly, with significant opportunities to address unmet needs,” said Jacek Olczak, chief executive of Philip Morris.
“By joining forces and investing our resources in the continued scientific excellence of our two companies we can secure critical capabilities to accelerate our long-term growth in beyond nicotine products, which is a core strategic focus for PMI.”
AJ Bell investment director Russ Mould said: “There seems to be an element of poacher turned gamekeeper for Philip Morris in this deal as it looks to use its expertise in inhalation for good – making Vectura’s inhaled drug delivery solutions a good fit.
“Vectura shareholders may be pleased this is an all-cash offer as many might have had ESG objections to being left with a position in a manufacturer of harmful cigarettes as opposed to a business working to improve people’s health.”
The Vectura bid is Philip Morris' second major deal in as many weeks. Last week it snapped up nicotine gum manufacturer Fertin Pharma for $820m.
Watch: Philip Morris CFO talks earnings, potential nicotine regulations