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Vectura tussle chips away at money’s winning might

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A man takes medicine for bronchial trouble in Beijing, China, November 2, 2014. REUTERS/Kim Kyung-Hoon

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LONDON, Aug 13 (Reuters Breakingviews) - Stakeholder capitalists like to shout. In the case of Philip Morris International’s (PM.N) offer for inhaler maker Vectura (VEC.L), the volume didn’t make much difference. PMI’s deep pockets prevailed over revulsion from health charities and a handful of investors at Big Tobacco looking to profit from treating diseases it helped create. Still, the noise makes scrutinising deals on broader stakeholder grounds look more normal.

Vectura’s board on Thursday endorsed PMI’s 1.1 billion pound offer, a mere 6% above one from Carlyle (CG.O) that it recommended a week ago. At the time, it considered ownership by the private equity group to be in the interests of some of its current stakeholders. Its observation that such parties would benefit from PMI’s financial heft and desire to boost research and development spending shows how subjective decisions can be when the focus stretches beyond solely financial returns.

In the end, Vectura set aside the competing ethics and went for the maximum cash. That’s probably what investors wanted: even though 11% had irrevocably committed to Carlyle’s offer, implying they were loath to sell to Big Tobacco, the gesture rang somewhat hollow. If PMI Chief Executive Jacek Olczak had offered 10% more, the likes of Axa Investment Managers would have been released from their commitment. And even though he didn’t, the anti-smoking shareholders are unlikely to hold out as minority investors in a PMI-controlled company, assuming Olczak gets the necessary 50% support.

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Despite their lack of ultimate bite, though, the bark from PMI detractors shows a clear direction of travel. Considering the impact of a takeover on parties such as employees or suppliers is gaining ground. The notion of a deal falling short on wider stakeholder concerns now looks conceivable, especially in the take-private frenzy engulfing UK companies.

Clayton, Dubilier & Rice and a consortium led by Fortress Investment are going head-to-head over cuddly supermarket chain Wm Morrison Supermarkets (MRW.L). Unlike with Vectura, having two private equity suitors makes it easier to compare their approaches. If the prices are close enough, pledges on protecting jobs or relationships with suppliers may finally be enough to swing the outcome.

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CONTEXT NEWS

- Inhaler maker Vectura on Aug. 12 said its board intended to recommend a 1.1 billion pound ($1.5 billion) takeover offer from U.S. tobacco company Philip Morris International.

- The Marlboro maker increased its offer to 165 pence on Aug. 8, surpassing a bid from private equity group Carlyle by 10 pence, or 6%. Carlyle later declared its offer final.

- Shares in London-listed Vectura were flat at 163 pence by 0930 GMT on Aug. 13.

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Editing by Ed Cropley and Karen Kwok

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