Companies make strategic plans and the strategic planning group examines multiple companies to come up with companies to work together with and possibly merge with. It is a normal practice and often the companies to merge with are in the same field – it is easier to vertically integrate than buying companies in a new regulatory space.
In the UK, there is a British company called Vectura Group PLC which licenses a range of medical inhalers to larger pharmaceutical companies. It is a good business and 2 US companies are interested in buying it – the Carlyle Group and Phillip Morris International. A bidding war has emerged and both of the companies have access to large amounts of credit.
The issue is a number of health organizations have come out against Phillip Morris’s bid because to them it would be unethical for a tobacco company to profit from treating lung diseases that its products helped cause.
Another issue is half of Vectura’s 500 people are researchers, and in Europe, if the tobacco company owned the company its researchers would not be able to work with research universities in Europe.
The ironic part is Phillip Morris International wants to move away from tobacco and become a heath care and wellness business.
Linking to dividend paying stocks, all companies which are profitable have a past history, sometimes it is wonderful, sometimes it is not in keeping with today’s ideals, but companies which are profitable are desirable to own. When there is a merger on the books, those who are against it will use the company’s past to help them win votes, even though they may not be much better. When you invest in the future of the company, the company does have baggage and it is up to you to decide if you would rather find an alternative.
There are more questions than answers, till the next time – to raising questions.