Inhaler maker backs takeover by tobacco titan behind Marlboro

Philip Morris says taking over Vectura, the FTSE 250 lung drug company, will allow it to go 'beyond nicotine'

One of Britain's biggest respiratory drug makers has agreed to a takeover by the world's largest tobacco company, in a £1.1bn deal that will be seen as a crucial test of City shareholders' commitment to ethical investing. 

Directors at Vectura have given their backing to a 165p-per-share offer from Philip Morris International (PMI), the US-listed titan that makes Marlboro cigarettes.

The decision sparked an immediate backlash from anti-smoking charities and piles pressure on major institutional investors such as Legal & General, which have repeatedly talked up their ethical credentials and are likely to face calls to vote against the deal.

Vectura is supporting PMI's offer instead of a lower proposal of 155p made by Carlyle, the US private equity firm.

The drug company's board said that its directors "appreciate Carlyle's interest in Vectura over this lengthy process and their support for Vectura's strategy". However, they added that the PMI bid offers more cash for shareholders, and that the cigarette company's significant financial resources could benefit its business.

Shareholders will now be asked to vote on the deal, with a simple majority required to get it through.

Led by chairman Bruno Angelici, the Vectura board knows it will face opposition from at least 11pc of investors - including French investment giant Axa, which remains committed to supporting Carlyle. 

Health charities hit out at the Vectura's decision after stepping up their campaign against the sale to PMI.

Sarah Woolnough, chief executive of Asthma UK and the British Lung Foundation, said: "We are extremely shocked and concerned that the board of respiratory medicine company Vectura has chosen to recommend a takeover by tobacco company Philip Morris International.

"We will continue to oppose this dreadful proposed takeover until a final decision is made. We appeal now to Vectura’s shareholders to make the right and ethical choice and say no to big tobacco.”

Dr Nicholas Hopkinson, the chair of Action on Smoking and Health, said Philip Morris had "no place in healthcare" and urged shareholders to ignore the advice from the Vectura board. Vectura's technology is used in NHS inhalers to help treat asthma and smoking-related conditions. 

He said: "A Philip Morris takeover will ruin Vectura. Doctors will stop prescribing its products, scientists will leave rather than become pariahs and the academic collaboration necessary to drive progress will cease."

Directors' recommendation came just hours after more than 20 health charities, public health experts and doctors in the UK and US wrote to Vectura urging it to reject the PMI bid. 

Universities are understood to be planning to cut ties if the deal goes through because of their ethics policies on accepting funding from tobacco companies.

Philip Morris has argued that the takeover of London-listed Vectura will help it to diversify into becoming a "wellness company" and has called for a ban on cigarettes in as little as 10 years. 

It has defended itself from those critical of its takeover of a health firm, saying its own "business model and strategy is driven by a long-term commitment to the transformation of its business and not a search for short term gains and efficiency".

The comment was seen as a barb directed at rival bidder Carlyle, which decided against increasing its bid earlier this week on the eve of an auction to decide whjo would win the takeover race.

At the time, the private equity firm said: "Carlyle believes its offer is in the best interests of the business and its stakeholders, including its employees, partners and customers, as well as, most importantly, the patients it serves and helps to provide with effective and accessible medicines." 

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