The directors of Vectura finally emerged and spoke late on Thursday: stuff all our previous ethical boasts, we’re happy to see a healthcare company – one that develops inhalers to treat lung diseases, no less – sold to a tobacco giant for the sake of a few extra millions in a a billion pound bid contest.
It wasn’t quite like that, of course. The board, chaired by Bruno Angelici, merely pushed out a statement that muttered about “fiduciary duties” and noted that the Philip Morris 165p-a-share bid represents a “superior price” to the 155p from private equity firm Carlyle. It amounts to the same thing.
Angelici & co didn’t bother to acknowledge the storm of protest from healthcare charities and public health bodies or even the board’s own statement last Friday, when the leadership in the bidding was reversed, that Vectura may be “better positioned” under Carlyle. The directors say they are unanimous in now backing Philip Morris. If so, they are suffering a severe case of groupthink. A fiduciary duty, as the outside world understands the term, means doing the best thing for the company. One wonders if Vectura’s scientists were consulted.
If the Philip Morris offer is to be defeated, it’ll be down to the big shareholders, who now have a chance to demonstrate what they mean when they talk about responsible investing. Don’t expect them to take it – or, at least, not a majority. Most are equally capable of stretching the definition of fiduciary duties to breaking point.
All happy with Aviva and Cevian … for the moment
Cevian Capital set the bar high at Aviva, and the insurer’s chief executive, Amanda Blanc, didn’t quite clear it. No matter. The return of capital to shareholders, from the proceeds of the flurry of disposals in the last year, will be £4bn, which is about £500m more than the City had expected before the activist investor started talking about £5bn.
In any case, Aviva’s use of the phrase “at least” allows room for a later tickle and, as Cevian noted approvingly, Blanc is cracking on with the job. The £4bn action is expected to be completed by the end of the first half of 2022 with a £750m share buy-back starting immediately.
Everybody happy? For the time being, one suspects so. Cevian is not at the noisy end of the activist spectrum and was, in any case, going with the flow at Aviva. Even before it turned up with a 5% stake in June, Blanc had delivered more fireworks in 12 months than her over-paid predecessors had managed in 12 years. Her exercise in portfolio slimming has seen operations in France, Italy, Poland, Vietnam and elsewhere sold for a grand total of £7.5bn.
Stage two of the reinvigoration operation looks, if anything, harder. There is clearly scope to find more growth from the core markets of the UK, Ireland and Canada. If there wasn’t, Aviva’s share price would not have performed so miserably for two decades.
But a three-year journey to 800p, which is what Cevian imagines, looks a stretch given that the share price, even with the benefit of Blanc’s deal-making and a gentle pricing backdrop in general insurance, stands at 421p, up 3.5% on Thursday. If even greater sums of capital can be released eventually from Aviva, which seems to be Cevian’s thesis, is not obvious how it’s supposed to happen. But that’s tomorrow’s problem.
Selling a slice of Regal wouldn’t be Cineworld’s worst idea
Cineworld is pondering a listing in the US, or just a listing of its US chain, Regal. But the move, it says, has “nothing to do” with the meme-stock merriness that has helped its main American competitor, Odeon-owning AMC Entertainment.
One should hope so too. Basing a corporate strategy on reading the whims of meme-traders would be unwise, even if AMC, with its share price up massively this year, seems to be giving it a shot and having some success.
The official explanations for the US idea are the fact that Regal accounts for 75% of Cineworld’s revenues and the US capital markets are “the largest and most liquid in the world”.
The reference to capital markets was presumably a nod to Cineworld’s fragile balance sheet. The company was over-borrowed even before Covid and has stumbled through the months of closed movie theatres by adding even more debt. At the end of June, the overall tally, including lease liabilities, stood at $8.4bn (£6bn), which is plainly too much. If it can be done, flogging a slice of Regal is not the worst idea for a company still firmly in a financial crisis.