Philip Morris International’s £1.1 bn Acquisition of Vectura

By Sonia Andrzejuk, Edoardo Borsoi, Luca Introna and Andrea Zenoniani (Bocconi University)


Overview of the deal

Acquirer: Philip Morris International Inc. (PM)

Target: Vectura Group PLC (VEC.L)

Total Transaction Size: $1.5 bn (£1.1 bn)

Bid premium: 35.25%

Rumour date: 26/05/2021

Announced date: 09/08/2021

Expected completion date: 31/12/2021

Target advisors: JP Morgan, Rothschild & Co.

Acquirer advisor: Bank of America Corporation

Cigarette maker Philip Morris (PM.N) clinched its £1.1 bn takeover of asthma inhaler maker Vectura (VEC.L). On 16/09/21 it was announced that the acceptance condition has now been met, in respect of 448,246,977 shares (74.77 percent). The offer has become unconditional in all aspects.

Buying the London-listed inhaler maker is part of Philip Morris' long-term plan to develop "smoke-free" products and switch to being a "broader healthcare and wellness" company.

However, the deal has faced backlash since more than 20 UK, US, and European organizations have written to Vectura's management, urging it to reconsider the takeover on ethical and practical grounds.

In particular, it has angered health groups such as Asthma UK and the British Lung Foundation that have questioned whether a tobacco group should own a company that cures the very respiratory illnesses cigarettes cause. Indeed, it creates perverse incentives for PMI to sell more of its harmful products so they might then profit again through treating smoking-related diseases.

Going beyond these critics, PMI affirmed its commitment to using its resources and expertise to help Vectura grow its business and help PMI achieve its Beyond Nicotine ambitions.

“While PMI and Vectura come from different places, when it comes to the future, we are united by a common commitment: employing science and technology to develop innovations that aim to improve people’s lives, transform public health, and help society to progress. ” - Jacek Olczak, CEO of PMI

Company Details: (Acquirer - Philip Morris International Inc.)

Philip Morris International Inc. (PMI) is a Swiss-American multinational cigarette and tobacco manufacturing company, with products sold in over 180 countries. The most recognized and best-selling product of the company is Marlboro.

While it is the leading international tobacco company today, in 2016 PMI radically changed its business strategy; The firm announced its vision to deliver a smoke-free future and started shifting its resources toward the development and responsible marketing of scientifically substantiated smoke-free products. By 2025, PMI aims to become a majority smoke-free business, with its smoke-free products accounting for more than 50 percent of its total net revenues.

Founded in 1847, headquartered in New York City, New York, USA

CEO: Jacek Olczak

Number of employees: 71,000

Market Cap: $158.47 B (as of 24 September 2021)

EV: $184.27 B

LTM Revenue: $30.07 B

LTM EBITDA: $13.72 B

LTM EV/Revenue: 6.13 x

LTM EV/EBITDA: 13.43 x

Company Details (Target - Vectura Group PLC)

Vectura is a leading specialist inhalation contract development and manufacturing organization that provides innovative inhaled drug delivery solutions that enable customers to bring their medicines to patients.

With differentiated proprietary technology and pharmaceutical development expertise, Vectura is one of the few companies globally with the device, formulation, and development capabilities to deliver a broad range of complex inhaled t