No auction showdown in battle to buy asthma firm

Philip Morris sells more than a tenth of cigarettes worldwide

The takeover battle between tobacco giant Philip Morris and a US private equity firm for an asthma medicine company will not go to auction.

Carlyle said it would not increase its £958m ($1.33bn) bid for drugmaker Vectura after Philip Morris had increased its offer to more than £1bn.

The private equity firm said earlier it considered its final offer of £1.55 a share as "full and fair".

Vectura makes inhaled medicines and devices to treat respiratory illnesses.

The firm counts Novartis and GSK among its customers.

The takeover of the Vectura had been due to enter a rare head-to-head auction process, after the regulator, the Takeover Panel, gave the two bidders a week to make their best offers for the FTSE 250 firm.

The Takeover Panel said all three firms had agreed to the terms of the auction procedure, before Carlyle said it would not increase its bid.

Simon Dingemans, a director in Carlyle's European buyout advisory group, said the private equity firm believed its offer was "in the best interests" of Vectura.

Vectura previously backed a deal from a US private equity firm

The takeover battle began in May with a £958m bid from Carlyle, which received early backing from Vectura's board.

But on Sunday, Philip Morris increased its offer to £1.65 per share, which totalled a bid of about £1.02bn ($1.41bn) from the Marlboro cigarette-maker.

London-listed shares of Vectura closed at £1.63 on Tuesday after hitting a more than five-year high of £1.76 pence earlier in the session.

The firm has gained 33% in value since Carlyle's first offer in May.

Philip Morris recently said it could stop selling cigarettes in the UK in 10 years' time as it focuses on alternatives, such as heated tobacco.

The firm indicated it would welcome a government ban on cigarettes and said "strong regulation" was needed to "help solve the problem of cigarette smoking once and for all".

However, health charity Ash said it was hard to take such claims seriously from the firm responsible for selling over a tenth of cigarettes globally.