The amusing line in the unfunny saga of a tobacco giant trying to buy a company that develops inhalers to treat lung diseases came last Friday when the board of Vectura, the target, switched its allegiance from Philip Morris to the rival bidder, the private equity firm Carlyle. The directors said it wasn’t only Carlyle’s higher offer they liked. They also noted “the reported uncertainties” for Vectura’s stakeholders if the Marlboro men were to win.
Those reports – everything from fury on the part of medical groups to threats to Vectura employees’ membership of scientific bodies – were entirely predictable. But, it seems, the board had failed until that point to spot the problem in a healthcare company accepting Big Tobacco’s dollar. Up until then the directors were prepared to swallow Philip Morris’s pitch that it wants to be a “wellness” company and will quit the fags one day, honest.
Vectura’s recommendation is temporarily redundant because Philip Morris chucked a higher bid, just over £1bn, on the table on Sunday and the Takeover Panel has now ordered that a five-day auction be run to determine best offers.
But a formal auction is not an excuse for Vectura’s board to retire to the labs, or even the bike sheds. At the end of the process it is still allowed to say which offer is best for the company. Exercising a “fiduciary” duty involves more than simply saying a bid of 165p-a-share beats one at 155p. The wider picture – the fluffy stakeholder stuff belatedly acknowledged from the boardroom – matters.
Carlyle is not the embodiment of saintliness, it should be said. In different circumstances, it probably wouldn’t be shy about doing deals with tobacco firms itself. But it looks a better owner of Vectura than Philip Morris for many reasons – experience in healthcare investment, or the presence of Simon Dingemans, a former finance director of GlaxoSmithKline, as its lead figure in the offer.
Vectura’s board can’t undermine the auction at this stage, but, once the bidding is over, the board should return to the principle it finally stumbled upon last Friday: healthcare and cigarettes do not belong together.
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