Scam: Philip Morris was known for his Marlboro Man ads
The boss of tobacco giant Philip Morris International has defended himself vigorously against his controversial deal to buy a UK inhaler company – pledging to stop selling cigarettes in the UK within the next decade.
Jacek Olczak said his bid to acquire Wiltshire-based Vectura is a crucial part of his plan to become a ‘health and wellness company’.
Philip Morris International closed the controversial £1 billion deal earlier this month, surpassing a bid from US private equity firm Carlyle. But the deal for Vectura, which is on the FTSE 250 list, which supplies inhaled drugs and asthma treatments, sparked backlash from health care campaigners and politicians.
Critics argue that it is unethical for a company that sells cigarettes to also sell medical devices used by people affected by smoking.
MPs have written to Minister of Affairs Kwasi Kwarteng and Minister of Health Sajid Javid calling on them to block the deal.
Speaking to The Mail on Sunday, Olczak replied: “There are critics who say, ‘Why does Philip Morris go to pharmacy?’ I want to allow this company to leave smoking behind. If I don’t do alternatives to smoking, what do you want me to do?
‘There are many emotions. However, if I put some logic into this whole thing, what I’m actually doing is helping Philip Morris get out of cigarettes faster. I think that you can completely solve the problem of smoking in the UK in a maximum of ten years.’
When asked if that meant Philip Morris would stop selling cigarettes in the UK within ten years, he replied: ‘Absolutely.’
Olczak said the Marlboro brand would likely disappear altogether from Britain, where it was founded in the late 1800s, before being registered in New York in 1908.
The name was a nod to the Great Marlborough Street factory of the then British company in Soho, central London. Today’s Philip Morris International – now a US-headquartered multinational that sells tobacco products around the world – has invested huge sums in alternatives to smoking, including e-cigarettes, or ‘vapes’, and devices that don’t burn.
Heating tobacco, rather than burning it, creates a nicotine-containing vapor without many of the chemicals commonly associated with smoking. It is considered less harmful to health than smoking traditional cigarettes. Olczak said of the Marlboro brand: “It will disappear. The first choice for consumers is to stop smoking. But if they don’t, the second best choice is to switch them over to the better alternatives.
“If the cost is Marlboro disappearing, I’m definitely not going to blink. I can build another brand. It’s worth doing if we solve the smoking problem.”
Speaking about the acquisition of Vectura itself, Olczak said the company, which is headquartered in Chippenham, would be run remotely from Philip Morris International and would not be subsumed into the larger tobacco industry.
“We plan to operate Vectura as an autonomous business unit as it has nothing to do with nicotine products,” he said.
“I’m actually building another part of Philip Morris. A company like Vectura is an important part of accelerating my path.’
Despite the political backlash, a source close to the government said the ministers were “unlikely” to intervene as there was no clear legal argument to block the deal. Vectura’s investors are also expected to support the acquisition. Two of the company’s 20 largest shareholders told The Mail on Sunday that they support the offer because it is their responsibility to achieve the highest return on investment for their clients.
However, fund managers have been branded hypocritical for beating the drums on ethical and socially responsible investing – while backing the sale of a health company to a tobacco giant.
Give up: Jacek Olczak wants to get away from cigarettes and into ‘wellness’
Vectura’s shareholders include the world’s largest asset manager BlackRock and Legal & General, which manages £1.29 trillion in client money worldwide.
Alan Miller, founder of asset manager SCM Direct, said: “The hypocrisy of BlackRock and Legal & General is breathtaking and the acquisition of Vectura is just the latest example.
“Neither has objected to this acquisition, although both chief executives embrace the virtues of environmental, social and governance (ESG) investment and green principles in general.” Legal & General has also linked executive bonuses to ESG targets from 2021. Axa Investment Management is another Vectura shareholder who finds the proposed acquisition by Philip Morris at odds with its investment ethic.
The parent company, the French insurance giant Axa, has a large healthcare business. Axa has signed the Tobacco-Free Finance pledge and claims on its website to ‘lead the way in the fight against tobacco’.
A source close to Axa said the Vectura deal is “stuck between a rock and a hard place” because accepting Philip Morris’s offer would likely be the best outcome for shareholders.
One fund manager said the cash offer meant he would not hold shares in a tobacco stock, although he admitted his fund would benefit from the sale to a tobacco company.
He pointed out that Philip Morris will need to close such deals if the company is to transition into a “health and wellness company,” just as oil giants are trying to move away from fossil fuels. Olczak said, ‘It’s like saying that if I produce oil, I can’t go electric. By telling me how I’m solving the problem, I’m creating the impression that I’m a hypocrite – wouldn’t you rather have a cigarette manufacturer who is happy to solve the problem?’
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