UK pharmaceutical firm Vectura agrees to £958m takeover deal

Private equity firm Carlyle Group to buy company that is developing inhaled treatment for Covid-19

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Last modified on Wed 26 May 2021 07.38 EDT

The British pharmaceutical company Vectura Group, which is developing a pioneering inhaled treatment for Covid-19, has agreed a £958m takeover by Carlyle Group as it looks set to become the latest in a long line of UK businesses snapped up by private equity during the pandemic.

The board is unanimously recommending that shareholders in the London-listed company accept the offer, which represents a 32% premium to its ex-dividend closing price on the day before the deal was announced.

Under the terms of the offer, shareholders would receive a total of 155p a share, consisting of 136p cash plus a 19p dividend.

Carlyle’s deal is the latest in an extraordinary year for takeovers, with a string of household names taken private, including the motoring group AA and the private-equity backed multibillion-pound buyout of the supermarket chain Asda.

Many companies’ share prices have not fully recovered from steep falls at the start of the pandemic, while borrowing money remains cheap thanks to record low interest rates, creating ideal conditions for takeovers of listed companies, especially at a time when private equity firms are sitting on large reserves of cash.

More companies have been taken private in the last 18 months than at any time since the financial crisis, according to data from Dealogic. The data group has calculated that 123 UK firms have been bought by private equity firms in deals worth more than £36bn since the start of 2020, while a further 19 deals worth almost £16.6bn are in progress.

The Wiltshire-headquartered biotech company specialises in creating inhaled formulations of medicines developed by a range of different companies. Vectura is working with the UK-based Inspira Pharmaceuticals to develop an inhaled formulation of the latter’s plant-based lead drug candidate for the treatment of Covid-19.

Vectura’s shares soared by more than 33% after the announcement of the deal to almost 163p. However, in recent months they had been well below the record high of 180p from mid-2015.

Carlyle is one of the largest global investment firms, whose private equity division has $137bn (£97bn) of assets under management and more than 640 active investments, including the insolvency and restructuring firm Duff & Phelps and the luxury fashion brand Golden Goose.

The company’s value, combined with its current pipeline of work and better-than-expected 2020 financial results, is likely to have appealed to Carlyle, said Russ Mould, the investment director at the stockbroker AJ Bell: “It is a company that is very good at what it does in a potentially extremely interesting long-term growth area.”

Vectura said it had 13 inhaled and 11 non-inhaled products, marketed by its global partners including the pharmaceutical firms GSK, Bayer and Novartis. It also has a portfolio of drugs in clinical development.

Vectura said it was one of a handful of global companies that had the device, formulation and development capabilities to deliver a range of inhaled treatments.

Bruno Angelici, Vectura’s chair, called the Carlyle Group offer “attractive”, and said the company had made strong progress since it launched its strategy to become a leading inhalation-focused contract development and manufacturing organisation in 2019.

“The offer reflects the quality, strength and long-term performance of Vectura’s businesses and its future growth potential,” Angelici said.

Simon Dingemans, a managing director in Carlyle’s European buyout advisory group, said the firm had followed Vectura’s change in strategy. “We believe that under Carlyle’s ownership Vectura will be able to accelerate its transformation significantly with greater access to capital and the support of our long experience in the sector.”

Among other recent private equity deals was the £3.8bn takeover of the security outsourcing firm G4S by its American rival Allied Universal Security Services. G4S, which runs services including the operation of four British prisons and management of 21 UK Covid-19 test centres, was subsequently delisted from the London stock exchange.

Earlier in May, the private equity firm KKR agreed to buy the UK-based infrastructure investor John Laing, which has stakes in Alder Hey children’s hospital in Liverpool and a retirement home building project with McCarthy & Stone, in a £2bn deal.

The flurry of dealmaking is expected to continue, because private equity firms are not only sitting on large amounts of money, but are also raising cash as several companies launch their IPOs in a rush to go public.

“There are bargains to be had,” said Mould. “You can argue that the UK stock market has performed terribly on the global stage since the Brexit vote.

“Private equity companies are awash with cash. They are looking for a home for that money, as they are not paid to sit on low returns, they are paid to invest that capital for their clients.”

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