Philip Morris to acquire British drugmaker Vectura for £1.05 billion

Philip Morris International Inc (NYSE: PM) said on Friday it will buy Vectura Group plc (LON: VEC) for £1.05 billion as part of its push to expand its products portfolio beyond nicotine.

The Marlboro cigarette maker’s deal translates to 150 pence per share in cash for Vectura stockholders – an 11% premium on the price at which the drugmaker closed the regular session on Thursday. Philip Morris’ proposal also tops what Carlyle Group had previously offered.

Philip Morris agreed to buy Fertin Pharma last week

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Vectura shares jumped roughly 13% on Friday morning. The British pharmaceuticals business had recommended shareholders to accept Carlyle’s bid but said it was now withdrawing it in favour of the new proposal from Philip Morris. Carlyle is yet to make an official statement on the news.

The announcement comes only a week after Philip Morris agreed to acquire Fertin Pharma (nicotine gum maker) for £588.58 million from private equity firm EQT. According to CEO Jacek Olczak:

“It’s not an acquisition I can match with anything I have at PMI. Both Fertin and Vectura offer us the capabilities to double up on products. If we were to develop our own products organically, it would be doable, but it would take time. We can’t lose focus.”

Why does Philip Morris want to go beyond nicotine?

As regulatory crackdowns continue on the tobacco industry and people get more health conscious, Philip Morris expects demand for cigarettes and related products to go down in the future. Its growth strategy for the upcoming years, therefore, is based on going ‘beyond nicotine’, expressed earlier this year in February.

The American-Swiss multinational said it would want Vectura that makes about 13 inhaled medicines, to continue to operate independently after the successful completion of the transaction that is subject to shareholders’ approval. The acquisition will help Philip Morris penetrate the respiratory drug delivery market.