* Vectura withdraws support for Carlyle deal
* UK firm recommends Philip Morris offer
* Deal is second by Philip Morris in a week
* Shares jump 14%
(Adds industry context, analyst comments, updates shares)
By Yadarisa Shabong and Siddharth Cavale
July 9 (Reuters) - Tobacco group Philip Morris International
agreed on Friday to buy Vectura for 1.05 billions pounds
($1.44 billion), giving the U.S. firm access to the British
drugmaker's respiratory ailment treatments and inhaling device
technology.
The move by Philip Morris is the latest push by big tobacco
companies to change their image following years of negative
press and lawsuits for marketing and selling cigarettes, a
product that health advocates and experts say continues to be a
leading cause of preventable deaths worldwide.
The offer of 150 pence per share to investors in Vectura
topped a previous 136 pence proposal by investment firm Carlyle
Group, and was 11% higher than the drugmaker's closing
share price on Thursday.
Vectura, whose shares rose as much as 14% to 154 pence,
said it was withdrawing its recommendation for Carlyle's
proposal and was adjourning a shareholder meeting it had
convened on Monday.
Philip Morris aims to use Vectura's expertise with inhalable
formulations and device design to produce a range of
over-the-counter and prescription-based respiratory therapies,
it said in a statement.
It has set a target to generate more than 50% of its revenue
from smoke-free products and at least $1 billion from products
beyond nicotine by 2025 as part of its "evolution into a broader
healthcare and wellness company".
Vectura makes approved inhaled medicines and associated
devices to treat respiratory illnesses such as asthma, and
counts Novartis AG and GlaxoSmithKline Plc
among its customers.
"On the one hand Phillip Morris’ determination to accelerate
the end of smoking might seem like turkeys voting for Christmas
but as more and more people shift to 'healthier' lifestyles they
would have eventually found themselves obsolete," AJ Bell
financial analyst Danni Hewson said.
"The move to scoop up Vectura from under the nose of Carlyle
is part of a carefully thought out shift to smoke free products
and investing in devices that will make lives better for people
suffering from respiratory problems and gives good PR."
BIDDING WAR
Carlyle said it was "considering its options and a further
announcement will be made in due course", raising the prospect
of a bidding war. In the meantime, it encouraged Vectura
shareholders to take no action.
Peel Hunt analysts said Philip Morris' bid underscored the
value of Vectura's technology platform, reducing the likelihood
of a counter bid by private equity.
Other tobacco majors British American Tobacco (BAT)
and Altria have also set ambitious targets to switch
customers from smoking to less harmful e-cigarettes, cannabis
and tobacco-heating products but with varying degrees of
success.
While BAT is seeing a benefit from more smokers switching to
its e-cigarettes, Altria Group has seen its $12.8 billion
investment in e-cigarette maker Juul Labs nosedive after
regulators started taking a much harder stance on vaping
products. Altria on Friday also announced it was selling its
wine business.
Winston cigarette maker Imperial Brands Plc, in
contrast, has scaled down its ambitions with vaping devices and
other alternative nicotine products, and is doubling down on
cigarettes as it embarks on a five-year turnaround plan.
The deal is Philip Morris' second acquisition in the past
week, after agreeing to buy nicotine gum maker Fertin Pharma for
5.1 billion Danish Krone ($812 million).
The U.S. company said Vectura will operate as an independent
unit and will be the backbone of its inhaled therapeutics unit.
($1 = 0.7264 pounds)
($1 = 6.2842 Danish crowns)
(Reporting by Yadarisa Shabong, Siddharth Cavale and Uday
Sampath Kumar in Bengaluru; Editing by Edmund Blair and Emelia
Sithole-Matarise)
