Vectura takeover poses uncomfortable questions

Danni Hewson
16 September 2021

Danni Hewson AJ Bell financial analyst comments on Phillip Morris’ takeover of Vectura:

“Despite the ethical outcry, Vectura shareholders have succumbed to Big Tobacco’s big pockets.  It will raise a few eyebrows not least because the deal was seen as a chance to weigh up exactly how some of the city’s big names were really walking the ESG walk they’ve talked so loudly about embracing.

“Phillip Morris was relentless, it needed to be if it’s going to stand any chance of making good on its plans to generate at least $1bn from “Beyond Nicotine” products by 2025.  It already has some experience in respiratory medicine, and in May its Chief Sustainability Officer said that the business was focussed on moving from “reducing harm toward doing good”, transforming the business despite the sceptics.

“But the sceptics have plenty of ammunition.  First $1bn is still a tiny proportion of the overall cash the business generates, although “smoke free” products did account for almost a quarter of net revenues in 2020.  Second, however good Phillip Morris’ intentions the bottom line is with this acquisition it’s playing both sides, making money from tobacco which makes people sick and inhalers which help them feel better.

“This takeover has been uncomfortable.  It’s posed difficult questions and many people won’t like the answer that’s been delivered.  But there is precedent, the world expects big oil to use their deep pockets to transform global energy strategies, from a purely pragmatic perspective shouldn’t we embrace the same ethos in this situation.  Phillip Morris isn’t ignoring the elephant; it’s making us all take a long hard look.  Discomfort is good, it tends to deliver change, but care must be taken that the promised change does come and there no detours on the journey.”

Danni Hewson
Financial Analyst

Danni spent more than 19 years at the BBC, presenting and reporting on business news across a variety of programmes – including BBC Breakfast, BBC News Channel, BBC Look North and latterly Radio 5 Live’s flagship business programme ‘Wake up to Money’. She is now responsible for producing analysis and commentary across a broad range of subjects at AJ Bell, from financial markets, to economics and personal finance.

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