US tobacco giant Philip Morris International snaps up 22.6% stake in Vectura

American tobacco giant Philip Morris International (PMI) has snapped up a 22.6% stake in Vectura as it closes in on a controversial £1.1bn takeover.

The cigarette maker has hired investment banking giant BofA Securities to offer 165p a share to any shareholders outside the US willing to sell their Vectura shares.

Shareholders have until 15 September to decide whether to sell to PMI, which claims to have ambitions for a “smoke-free” future, but still generates three-quarters of its revenue from cigarettes.

Under market rules, PMI would not be allowed to build its stake in a takeover target by buying shares from investors within the US.

But it can gather up stock from other international investors, helping it move towards majority ownership, at which point reluctant shareholders would have little incentive to hold out. Under the terms of the “tender offer” process for Vectura, investors can also pledge to sell their shares at a later date.

The takeover bid has sparked outrage among anti-smoking campaigners, and was described on Wednesday by one campaigner as a “sick joke”.

Vectura’s board last week unanimously recommended that shareholders accept the controversial £1.1bn takeover bid from the tobacco company. The board said the terms of the final PMI offer were “fair and reasonable” after PMI raised its bid to 165p a share to value the firm at £1.1bn, outbidding a rival £958m offer by the US private equity group Carlyle, which had agreed a takeover of Vectura in late May.

But health charities and public health experts have urged shareholders to vote against the takeover on the grounds that a tobacco company owner could hurt Vectura’s standing in the medical industry.

An open letter to shareholders, organised by Asthma UK and the British Lung Foundation, warned the takeover would “significantly hamper Vectura’s ability to continue operating as a viable, research-oriented business”, and hamper its ability to publish research in medical journals, or attract talented staff.

The letter asked Vectura shareholders “to consider both the business risks and the moral conflict of the proposed takeover. Tobacco companies should not profit from treating the illnesses their products cause”.

Three of Vectura’s largest investors – Axa Investment Managers, TIG Advisers and Berry Street Capital Management, who collectively control 11.2% of the shares – had publicly backed the Carlyle bid and are expected not support the PMI offer due to ethical concerns.