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🚫 Philip Morris: Oxymoron Of The Highest Order?
Think of the irony: A cigarette manufacturing company acquiring a substantial stake in a firm dealing with respiratory health. Impossible, you say? Tobacco giant Philip Morris International (PM) did precisely this and has earned the ire of activists and anti-smoking groups at once. Will the deal go up in smoke?
A Bidding War Separated By Pennies
Last month, Philip Morris bid $1.2B to acquire Vectura. While the bid was lower than that of Carlyle, it boosted the cash to shareholders to £1.50 per share.
In response, on August 6th, Carlyle, while preserving its bid, increased the cash component to £1.55 to woo Vectura back in its fold. The tug of war continued unabated when on August 8th, Philip Morris bumped up the cash part to £1.65 per share and boosted Vectura’s valuation from $1.2B to $1.4B.
So who did Vectura finally sign up with? You guessed it right. After initially going with Carlyle’s bid, the company did a flip flop and went straight into the arms of Philip Morris. In fact, Vectura’s board said they found the tobacco giant’s offer “fair and reasonable.”
The Cause. The Effect. And The Treatment!
So what do we have here? A company that generates three-quarters of its revenue from selling cigarettes which are a leading cause of lung diseases. And now, the company wants to treat people who are suffering from those very illnesses.
Perversely, Philip Morris is looking to capture the entire “value” chain. The ethical dilemma for the shareholders is whether to say “yes” to the cash or “no” by taking a principled stand.
Market Reaction
PM ended at $101.42, up 0.47%.
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