Philip Morris International Inc Offer for Vectura Group plc (7348E)

TIDM0M8V TIDMVEC

RNS Number : 7348E

Philip Morris International Inc

09 July 2021

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION OTHER THAN THE UNITED KINGDOM WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

9 July 2021

RECOMMED CASH ACQUISITION

Vectura Group plc ("Vectura")

PMI Global Services Inc. ("PMI Bidder")

a wholly owned direct subsidiary of Philip Morris International Inc. ("PMI")

to be implemented by a Scheme of Arrangement

under Part 26 of the Companies Act 2006

Summary

-- The boards of Vectura, PMI and PMI Bidder are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition pursuant to which PMI Bidder shall acquire all of the issued and to be issued ordinary shares of Vectura ("Vectura Shares"). The Acquisition is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.

-- Pursuant to the Acquisition, holders of Vectura Shares ("Vectura Shareholders") shall be entitled to receive:

 
 for each Vectura Share   150 pence in cash 
  held                     (the "Cash Consideration") 
 
   --              The Cash Consideration represents a premium of approximately:

o 10 per cent. to the cash consideration of 136 pence per Vectura Share under the terms of the Carlyle Offer;

o 55 per cent. to the volume weighted average Ex--Dividend Closing Price of 97 pence per Vectura Share for the 3 months ended 25 May 2021 (being the last Business Day prior to the announcement of the offer from Carlyle);

o 53 per cent. to the volume weighted average Ex--Dividend Closing Price of 98 pence per Vectura Share for the 1 month ended 25 May 2021 (being the last Business Day prior to the announcement of the offer from Carlyle); and

o 46 per cent. to the Ex--Dividend Closing Price per Vectura Share of 103 pence per Vectura Share on 25 May 2021 (being the last Business Day prior to the announcement of the offer from Carlyle).

-- The Cash Consideration and the Interim Dividend of 19 pence per Vectura Share which was paid on 11 June 2021 together value the Vectura Shares at 169 pence each (the "Acquisition Value"). The Acquisition Value values the entire issued and to be issued ordinary share capital of Vectura at approximately GBP1.045 billion.

-- If, on or after the date of this announcement, any dividend, distribution or other return of value is declared, made or paid, or becomes payable, by Vectura with a record time falling prior to the Effective Time, PMI Bidder reserves the right to reduce the Cash Consideration payable for each Vectura Share by an amount up to the amount of such dividend, distribution or other return of value. In such circumstances, Vectura Shareholders would be entitled to retain any such dividend, distribution or other return of value declared, made or paid.

-- The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings convened for 12 July 2021.

Background to and reasons for the Acquisition

- PMI is expanding into products beyond tobacco and nicotine, as part of a natural evolution into a broader healthcare and wellness company. In February 2021, it announced its ambition to generate at least $1 billion in annual net revenues from Beyond Nicotine products by 2025 and identified respiratory drug delivery as a key focus. Since becoming an independent company in 2008, PMI has invested over $8 billion in the development, scientific substantiation and commercialisation of innovative smoke-free products, with the aim of disrupting its own traditional business - the manufacturing and sale of cigarettes - and accelerating the end of smoking.

- This ambition is founded on PMI's strong understanding of aerosolisation and respiratory technology, its promising product development pipeline, and its willingness to continue investing in research and development, manufacturing and commercialisation. A combination of expertise in life sciences, inhalation technology, the use of natural ingredients, commercial deployment and experience of how to change consumer behaviour is the strong foundation for PMI's Beyond Nicotine business.

- PMI has committed substantial financial and human resources to developing, scientifically substantiating and commercialising innovative technologies to improve the lives of adult smokers, thereby transforming its business as it purposefully works to phase out cigarettes for a smoke-free future. It has already built the world's leading smoke-free brand (IQOS) and business in five years since the first full launch, with net revenues of $6.8 billion in 2020 representing almost one quarter of its business. PMI aims be a predominantly smoke-free company by 2025, with more than half of its net revenues from smoke-free products. A version of its innovative IQOS heated tobacco product was the first electronic smoke-free alternative to cigarettes to be authorised as a "Modified Risk Tobacco Product" by the FDA.

- PMI's Beyond Nicotine strategy articulates a clear long-term ambition to leverage its know-how and capabilities in inhalation and aerosolisation into key focus areas such as respiratory drug delivery - notably in inhaled therapeutics. By 2025, PMI aims to generate at least $1 billion in net revenues from products beyond tobacco and nicotine.

- PMI intends for Vectura to operate as an autonomous business unit, forming the backbone of PMI's inhaled therapeutic business. PMI is supportive of Vectura's current strategy to become one of the leading CDMOs in this segment and believes there are attractive opportunities to develop and launch proprietary inhaled therapeutic products together, and to expand the geographic reach of Vectura's business.

- The market for inhaled therapeutics is large and growing rapidly as technologies improve, with significant potential to expand into new application areas beyond the current market offering. Vectura is well positioned in this area, and PMI believes it can leverage Vectura's strengths together with its own to create better products to target unmet medical and consumer needs, in addition to being supportive of Vectura's current strategy to become one of the leading CDMOs in its segment. Under its ownership, PMI believes that Vectura can further enhance an already strong foundation through the access to capital and complementary expertise the Acquisition would provide.

- PMI has already committed resources to its own internal pipeline for the development of inhaled over-the-counter and prescription products. By adding Vectura's differentiated technologies and pharmaceutical development expertise for the delivery of complex inhaled therapeutics to PMI's existing strengths and expertise in inhalation (including pre-clinical safety and toxicology, clinical development and regulatory) PMI believes this would be a compelling combination. In addition, PMI announced on 1 July 2021 its agreement to acquire Fertin Pharma, a leader in the oral delivery of selfcare wellness products.

- The Acquisition presents a further and meaningful opportunity to accelerate PMI's Beyond Nicotine journey by harnessing Vectura's highly complementary human capital, technology, high quality infrastructure and deep know-how of inhalable formulation and device design development and analysis, drug/device combination, and pharmaceutical management processes and systems.

- PMI's board and management are committed to investing in scientific excellence over the long-term. They believe that Vectura can further thrive under PMI's ownership, supported by the sharing of expertise, technology and ample financial resources - empowering Vectura's skilled employees and management to deliver enhanced products for patients and partners and long-term growth and returns.

- PMI believes that Vectura's capabilities and experienced management team - supported by more than 200 scientists in formulation, devices, inhalation, regulatory teams and clinical manufacturing - will help PMI develop its healthcare and wellness operations and PMI believes that Vectura will play a pivotal role in driving its Beyond Nicotine business forward.

- In summary, PMI believes that, with Vectura operating as an autonomous business unit and forming the backbone of PMI's inhaled therapeutics business, the Acquisition will allow PMI and Vectura to accelerate their respective business models and drive the creation of a fully-owned pipeline of products across a broad range of sectors in the prescription drugs and over-the-counter categories, for example within cardiovascular and pain management, in addition to a number of selfcare wellness remedies. PMI believes the shared commitment to scientific excellence and access to capital that the Acquisition would provide can drive the development of innovative products and solutions which can improve people's lives and deliver a greater net positive impact on society.

Vectura Recommendation

-- On 26 May 2021, Vectura and Murano, a newly formed company indirectly controlled by funds managed by Carlyle Europe Partners V, announced that they had agreed the terms of an acquisition of the entire issued and to be issued ordinary share capital of Vectura by Murano, to be implemented by a scheme of arrangement (the "Carlyle Offer"). The scheme document in respect of the Carlyle Offer was published on 18 June 2021 which included a unanimous recommendation from the Vectura Directors to the Vectura Shareholders to vote in favour of the Carlyle Offer at the Carlyle Offer Shareholder Meetings.

-- In light of the superior proposal per Vectura Share put forward by PMI Bidder as compared to Murano, the Vectura Directors, who have been so advised by J.P. Morgan Cazenove and Rothschild & Co as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing their financial advice to the Vectura Directors, J.P. Morgan Cazenove and Rothschild & Co have taken into account the commercial assessments of the Vectura Directors. Rothschild & Co is providing independent financial advice to the Vectura Directors for the purposes of Rule 3 of the Takeover Code.

-- Accordingly, the Vectura Directors intend to recommend unanimously that Vectura Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Vectura General Meeting, each to be convened in due course. The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings.

Information on PMI, PMI Bidder and Vectura

-- In 2016 PMI announced its new purpose: to deliver a smoke-free future by focusing its resources on developing, scientifically substantiating and responsibly commercializing smoke-free products that are less harmful than smoking, with the aim of completely replacing cigarettes as soon as possible. This commitment was reaffirmed last year by PMI's Board of Directors in its Statement of Purpose, which explains how PMI is disrupting its business from the inside, leading the industry toward a future without cigarettes, acknowledging stakeholders, and ensuring the long-term success of the company.

-- As of March 31, 2021, PMI estimates that 14.0 million adults around the world have already switched to its IQOS heated tobacco product and stopped smoking, with a further 5.1 million IQOS users in various stages of conversion. PMI's smoke-free products are available for sale in 66 markets in key cities or nationwide. In the US, a version of IQOS has received marketing authorisation from the FDA under the premarket tobacco product application (PMTA) pathway; the FDA has also authorised the marketing of a version of IQOS and its consumables as a Modified Risk Tobacco Product (MRTP), finding that an exposure modification order for these products is appropriate to promote the public health.

-- Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, as well as clinical, PMI aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements. PMI's smoke-free product portfolio includes heat-not-burn and nicotine-containing vapor products, with a stated intention to enter the nicotine pouch segment in 2021.

-- Vectura is a provider of innovative inhaled drug delivery solutions that enable partners to bring their medicines to patients. With differentiated proprietary technology and pharmaceutical development expertise, Vectura is one of the few companies globally with the device, formulation and development capabilities to deliver a broad range of complex inhaled therapies. Vectura has thirteen key inhaled and eleven non--inhaled products marketed by major global pharmaceutical partners with global royalty streams, and a diverse partnered portfolio of drugs in clinical development.

Timetable and Conditions

-- It is intended that the Acquisition will be implemented by way of a scheme of arrangement under Part 26 of the Companies Act, further details of which are contained in the full text of this announcement and will be set out in the Scheme Document. PMI Bidder reserves the right to implement the Acquisition by way of a Takeover Offer, subject to the Panel's consent.

-- Completion of the Acquisition will be conditional, inter alia, on the following matters:

-- the approval of the Scheme by a majority in number of the Vectura Shareholders who are present and vote at the Court Meeting, either in person or by proxy, and who represent 75 per cent. or more in value of the Vectura Shares voted by those Vectura Shareholders;

-- the approval by Vectura Shareholders of the resolutions relating to the Acquisition representing at least 75 per cent. of votes cast at the General Meeting;

   --     the sanction of the Scheme by the Court; 
   --     the delivery of a copy of the Court Order to the Registrar of Companies;

-- the satisfaction or waiver of the UK National Security and Investment Condition and the German Foreign Investment Condition; and

-- approval under the respective merger control rules by the Competition and Consumer Protection Commission of the Republic of Ireland and the Japanese Fair Trade Commission being obtained.

-- The Acquisition is subject to the full terms and Conditions which will be set out in the Scheme Document. Subject to the satisfaction or (where applicable) waiver of the Conditions, the Acquisition is expected to become Effective during H2 2021.

-- The Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, together with an indicative timetable for implementation of the Scheme, will be dispatched to Vectura Shareholders (together with the Forms of Proxy) as soon as is reasonably practicable and, in any event, within 28 days of the date of this announcement (unless the Panel consents to a later date). The Court Meeting and the General Meeting are expected to be held in August 2021. Subject to certain restrictions relating to persons resident in Restricted Jurisdictions, the Scheme Document will also be made available on Vectura's website at www.Vectura.com and PMI's website at www.PMI.com.

Commenting on the Acquisition, Bruno Angelici, Vectura's chairman said:

The acquisition by PMI recognises Vectura's differentiated technologies, skills and expertise in inhalation and the continued development and supply of important medicines to patients.

We recognise the material increase in the price offered to Shareholders under the Acquisition when compared with the Carlyle Offer and have accordingly recommended the Acquisition to Shareholders. The Acquisition will provide our people with the opportunity to form the backbone of an autonomous inhaled therapeutic business unit of PMI, helping develop products to improve patients' lives and address unmet medical needs.

Commenting on the Acquisition, Jacek Olczak, PMI's Chief Executive Officer said:

We are delighted to welcome Vectura's great people and management team to join us in the next stage of our mission to improve people's lives through innovative developments in science and technology. We see Vectura's combination of device, formulation and development capabilities for inhaled therapeutics as highly complementary to our existing expertise, pipeline and experience in aerosolisation. The market for inhaled therapeutics is large and growing rapidly, with significant opportunities to address unmet needs. By joining forces and investing our resources in the continued scientific excellence of our two companies we can secure critical capabilities to accelerate our long-term growth in Beyond Nicotine products, which is a core strategic focus for PMI. We aim to achieve the first milestone of at least $1 billion in Beyond Nicotine net revenues by 2025 as we continue to evolve into a broader healthcare and wellness company.

This summary should be read in conjunction with the full text of this announcement. The Acquisition shall be subject to the Conditions and further terms set out in Appendix I to this announcement and to the full terms and conditions which shall be set out in the Scheme Document. Appendix II to this announcement contains the sources of information and bases of calculations of certain information contained in this announcement. Appendix III contains definitions of certain expressions used in this summary and in this announcement.

Enquiries:

 
 PMI Bidder 
 Investor Relations                             Tel: +41 (0)58 242 4666 
                                                 (Lausanne) 
                                                 Tel: +1 (917) 663 2233 
                                                 (New York) 
 Global Communications                          Tel: +41 (0)58 242 4500 
 David Fraser (International press enquiries) 
 Corey Henry (US press enquiries) 
 BofA Securities, as Financial Adviser          Tel: +44 (0)20 7628 1000 
  to PMI Bidder 
 Christina Dix 
 Geoff Iles 
 James Machin 
 Jack Williams 
 Sanctuary Counsel, PR Adviser to PMI           Tel: +44 (0)20 8194 3180 
 Ben Ullmann 
 Robert Morgan 
 Foxcroft Consulting, PR Adviser to             Tel: +1 212 300 4929 
  PMI 
 Hilary Lefebvre 
 Vectura                                        Tel: +44 (0)20 7881 0524 
 Will Downie (Chief Executive Officer) 
 Paul Fry (Chief Financial Officer) 
 J.P. Morgan Cazenove, as Joint Financial       Tel: +44 (0)20 7742 4000 
  Adviser and Joint Corporate Broker 
  to Vectura 
 James Mitford 
 Celia Murray 
 Alex Bruce 
 Hemant Kapoor 
 Rothschild & Co, as Joint Financial            Tel: +44 (0)20 7280 5000 
  Adviser to Vectura 
 Julian Hudson 
 Vincent Meziere 
 Toby Wright 
 Numis, Joint Corporate Broker to Vectura       Tel: +44 (0)20 7260 1000 
 James Black 
 FTI Consulting, PR Adviser to Vectura          Tel: +44 (0)20 3727 1000 
 Ben Atwell                                     Email:SCVectura@fticonsulting.com 
 Simon Conway 
 Public Enquiries 
 David Ginivan                                  Tel: +44 (0)7471 352 
                                                 720 
 Analyst/Investor Enquiries 
 Olivia Manser                                  Tel: +44 (0)7947 758 
                                                 259

DLA Piper UK LLP is retained as legal adviser to PMI and PMI Bidder.

Clifford Chance LLP is retained as legal adviser to Vectura.

Important Notices

Merrill Lynch International ("BofA Securities"), a subsidiary of Bank of America Corporation, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for PMI in connection with the matters set out in this announcement and for no one else and will not be responsible to anyone other than PMI for providing the protections afforded to its clients or for providing advice in relation to the subject matter of this announcement or any other matters referred to in this announcement.

J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), is authorised in the United Kingdom by the PRA and regulated in the United Kingdom by the PRA and the FCA. J.P. Morgan Cazenove is acting as financial adviser and corporate broker exclusively for Vectura and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Vectura for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in relation to any matter referred to herein.

N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and regulated by the FCA in the United Kingdom, is acting exclusively for Vectura and for no one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Vectura for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for Vectura and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Vectura for providing the protections afforded to clients of Numis, nor for providing advice in relation to any matter referred to herein.

Further Information

This announcement is for information purposes only and does not constitute an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy any securities, pursuant to the Acquisition or otherwise.

The Acquisition shall be made solely by means of the Scheme Document (or, if the Acquisition is implemented by way of a Takeover Offer, any document by which the Takeover Offer is made) which, together with the Forms of Proxy (or form of acceptance), shall contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition.

This announcement has been prepared for the purpose of complying with English law and the Takeover Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside England and Wales.

Vectura and PMI Bidder shall prepare the Scheme Document to be distributed to Vectura Shareholders. Vectura and PMI Bidder urge Vectura Shareholders to read the Scheme Document when it becomes available because it shall contain important information relating to the Acquisition.

This announcement does not constitute a prospectus or prospectus exempted document.

Overseas Shareholders

The release, publication or distribution of this announcement in or into certain jurisdictions other than the United Kingdom may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to other jurisdictions should inform themselves of, and observe, any applicable requirements.

Unless otherwise determined by PMI Bidder or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Acquisition by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to Vectura Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The Acquisition shall be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the Financial Conduct Authority.

Additional information for US investors

The Acquisition relates to shares of a UK company and is proposed to be effected by means of a scheme of arrangement under the laws of England and Wales. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act.

Accordingly, the Acquisition is expected to be made subject to the disclosure and procedural requirements and practices applicable in the United Kingdom and to schemes of arrangement under the laws of England and Wales which differ from the disclosure and other requirements of the United States tender offer and proxy solicitation rules. Neither the SEC, nor any securities commission of any state of the United States, has approved the Acquisition, passed upon the fairness of the Acquisition or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence in the United States.

However, if PMI Bidder were to elect (with the consent of the Panel) to implement the Acquisition by means of a takeover offer, such takeover offer shall be made in compliance with all applicable United States laws and regulations, including any applicable exemptions under the US Exchange Act. Such a takeover would be made in the United States by PMI Bidder and no one else.

In the event that the Acquisition is implemented by way of a takeover offer, in accordance with normal United Kingdom practice, PMI Bidder or its nominees, or its brokers (acting as agents), may from time to time make certain purchases of, or arrangements to purchase, shares or other securities of Vectura outside of the US, other than pursuant to the Acquisition, until the date on which the Acquisition and/or Scheme becomes effective, lapses or is otherwise withdrawn. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases or arrangements to purchase shall be disclosed as required in the UK, shall be reported to a Regulatory Information Service and shall be available on the London Stock Exchange website at www.londonstockexchange.com.

Each Vectura Shareholder is urged to consult their independent professional adviser immediately regarding the tax consequences of the Acquisition applicable to them, including under applicable United States state and local, as well as overseas and other, tax laws.

Financial information relating to Vectura included in this announcement and the Scheme Document has been or shall have been prepared in accordance with accounting standards applicable in the United Kingdom and may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

Vectura is organised under the laws of a country other than the United States. Some or all of the officers and directors of Vectura, respectively, are residents of countries other than the United States. In addition, most of the assets of Vectura are located outside the United States. As a result, it may be difficult for US shareholders of Vectura to effect service of process within the United States upon Vectura or its officers or directors or to enforce against them a judgment of a US court predicated upon the federal or state securities laws of the United States.

Forward-Looking Statements

This announcement (including information incorporated by reference in this announcement), oral statements made regarding the Acquisition, and other information published by Vectura, PMI Bidder or any member of the PMI Group contain statements which are, or may be deemed to be, "forward-looking statements". Such forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and on numerous assumptions regarding the business strategies and the environment in which PMI Bidder or any member of the PMI Group shall operate in the future and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements.

The forward-- looking statements contained in this announcement relate to PMI Bidder or any member of the PMI Group's future prospects, developments and business strategies, the expected timing and scope of the Acquisition and other statements other than historical facts. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "will look to", "would look to", "plans", "prepares", "anticipates", "expects", "is expected to", "is subject to", "budget", "scheduled", "forecasts", "synergy", "strategy", "goal", "cost--saving", "projects" "intends", "may", "will", "shall" or "should" or their negatives or other variations or comparable terminology. Forward--looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of PMI Bidder's, any member of the PMI Group or Vectura's operations and potential synergies resulting from the Acquisition; and (iii) the effects of global economic conditions and governmental regulation on PMI Bidder's, any member of the PMI Group or Vectura's respective businesses.

By their nature, forward--looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. These events and circumstances include changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates, future business combinations or disposals, and any epidemic, pandemic or disease outbreak. If any one or more of these risks or uncertainties materialises or if any one or more of the assumptions prove incorrect, actual results may differ materially from those expected, estimated or projected. Such forward-looking statements should therefore be construed in the light of such factors.

Neither Vectura or any of PMI Bidder or any member of the PMI Group, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward--looking statements in this announcement shall actually occur. Given these risks and uncertainties, potential investors should not place any reliance on forward-looking statements.

Specifically, statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Due to the scale of the Vectura Group, there may be additional changes to the Vectura Group's operations. As a result, and given the fact that the changes relate to the future, the resulting cost synergies may be materially greater or less than those estimated.

The forward--looking statements speak only at the date of this announcement. All subsequent oral or written forward--looking statements attributable to any member of the PMI Group or Vectura Group, or any of their respective associates, directors, officers, employees or advisers, are expressly qualified in their entirety by the cautionary statement above.

Vectura, the PMI Group and PMI Bidder expressly disclaim any obligation to update such statements other than as required by law or by the rules of any competent regulatory authority, whether as a result of new information, future events or otherwise.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Vectura for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Vectura.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8 3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they shall be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at http://www.thetakeoverpanel.org.uk/, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Electronic communications

Please be aware that addresses, electronic addresses and certain information provided by Vectura Shareholders, persons with information rights and other relevant persons for the receipt of communications from Vectura may be provided to PMI Bidder during the Offer Period as requested under Section 4 of Appendix 4 of the Takeover Code to comply with Rule 2.11(c) of the Takeover Code.

Publication on website and availability of hard copies

A copy of this announcement shall be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on Vectura's website at www.Vectura.com and on PMI's website at www.PMI.com by no later than 12 noon (London time) on the business day following the date of this announcement. For the avoidance of doubt, the contents of this website are not incorporated into and do not form part of this announcement.

You may request a hard copy of this announcement by contacting Vectura's registrar, Computershare Investor Services Plc, on 0370 707 1387 (or from outside of the UK, on +44 (0)370 707 1387) between 8:30 a.m. to 5:30 p.m. Monday to Friday (London time) or by submitting a request in writing to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZZ. Please note that Computershare cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. You may also request that all future documents, announcements and information to be sent to you in relation to the Acquisition should be in hard copy form.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

General

If the Acquisition is effected by way of a Takeover Offer, such offer becomes or is declared unconditional in all respects and sufficient acceptances are received, PMI Bidder intends to exercise its rights to apply the provisions of Chapter 3 of Part 28 of the Companies Act so as to acquire compulsorily the remaining Vectura Shares in respect of which the Takeover Offer has not been accepted.

Investors should be aware that PMI Bidder may purchase Vectura Shares otherwise than under any Takeover Offer or the Scheme such as pursuant to privately negotiated purchases.

If you are in any doubt about the contents of this announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor or independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriate authorised independent financial adviser.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

9 July 2021

RECOMMED CASH ACQUISITION

Vectura Group plc ("Vectura")

PMI Global Services Inc. ("PMI Bidder")

a wholly owned direct subsidiary of PMI International Inc.

to be implemented by a Scheme of Arrangement

under Part 26 of the Companies Act 2006

   1.         Introduction

The boards of Vectura, PMI and PMI Bidder are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition (the "Acquisition") pursuant to which PMI Bidder shall acquire all of the issued and to be issued ordinary shares of Vectura ("Vectura Shares"). The Acquisition is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.

   2.         The Acquisition

-- Pursuant to the Acquisition, which shall be subject to the Conditions and further terms set out in Appendix I to this announcement and to be set out in the Scheme Document, holders of Vectura Shares ("Vectura Shareholders") shall be entitled to receive:

 
 for each Vectura Share   150 pence in cash 
  held                     (the "Cash Consideration") 
 
   --              The Cash Consideration represents a premium of approximately:

o 10 per cent. to the cash consideration of 136 pence per Vectura Share under the terms of the Carlyle Offer;

o 46 per cent. to the Ex--Dividend Closing Price per Vectura Share of 103 pence per Vectura Share on 25 May 2021 (being the last Business Day prior to the announcement of the offer from Carlyle).

If, on or after the date of this announcement, any dividend, distribution or other return of value is declared, made or paid, or becomes payable, by Vectura with a record time falling prior to the Effective Time, PMI Bidder reserves the right to reduce the Cash Consideration payable under the Acquisition by an amount up to the amount of such dividend, distribution or other return of value or excess. In such circumstances, Vectura Shareholders would be entitled to retain any such dividend, distribution or other return of value declared, made or paid.

It is expected that the Scheme Document shall be published as soon as practicable and, in any event, (save with the consent of the Panel) within 28 days of this announcement. It is expected that the Scheme shall become effective during H2 2021.

   3.         Background to and reasons for the Acquisition

Key Messages

- PMI is expanding into products beyond tobacco and nicotine, as part of a natural evolution into a broader healthcare and wellness company. In February 2021, it announced its ambition to generate at least $1 billion in annual net revenues from Beyond Nicotine products by 2025, and identified respiratory drug delivery as a key focus. Since becoming an independent company in 2008, PMI has invested over $8 billion in the development, scientific substantiation and commercialisation of innovative smoke-free products, with the aim of disrupting its own traditional business - the manufacturing and sale of cigarettes - and accelerating the end of smoking.

- The market for inhaled therapeutics is large and growing rapidly as technologies improve, with significant potential to expand into new application areas beyond the current market offering. Vectura is well positioned in this area, and PMI believes it can leverage Vectura's strengths together with its own to create better products to target unmet medical and consumer needs, in addition to being supportive of Vectura's current strategy to become one of the leading CDMOs in the segment. Under its ownership, PMI believes that Vectura can further enhance an already strong foundation through the access to capital and complementary expertise the Acquisition would provide.

- PMI has already committed resources to its own internal pipeline for the development of inhaled over-the-counter and prescription products. By adding Vectura's differentiated technologies and pharmaceutical development expertise for the delivery of complex inhaled therapeutics to PMI's existing strengths and expertise in inhalation (including pre-clinical safety and toxicology, clinical development and regulatory), PMI believes this would be a compelling combination. In addition, PMI announced on 1 July 2021 its agreement to acquire Fertin Pharma, a leader in the oral delivery of selfcare wellness products.

- In summary, PMI believes, with Vectura operating as an autonomous business unit and forming the backbone of PMI's inhaled therapeutics business that the Acquisition will allow PMI and Vectura to accelerate their respective business models and drive the creation of a fully-owned pipeline of products across a broad range of sectors in the prescription drugs and over-the-counter categories, for example within cardiovascular and pain management, in addition to a number of selfcare wellness remedies. PMI believes the shared commitment to scientific excellence and access to the capital that the Acquisition would provide can drive the development of innovative products and solutions which can improve people's lives and deliver a greater net positive impact on society.

Background to PMI's Strategy

PMI is committed to building a sustainable business for sustainable growth over the long term. The main driver of this growth comes from addressing its biggest impact on society - that of the product. The first core element of this action is reflected in its continued commitment to developing smoke-free alternatives to accelerate the end of smoking. The second core element is the development and commercialisation of scientifically substantiated products and solutions Beyond Nicotine that aim to improve people's lives and deliver a net positive impact on society.

Since becoming an independent company in 2008, PMI has invested over $8 billion in the development, scientific substantiation and commercialisation of innovative smoke-free products, with the aim of disrupting its own traditional business - the manufacturing and sale of cigarettes - and accelerating the end of smoking. PMI's ambition is for smoke-free products to account for more than 50% of total net revenues by 2025, having already reached approximately 24% in 2020, just five years after the first national launch of its initial smoke-free IQOS product.

In support of this smoke-free future, PMI has amassed significant expertise in aerosolisation and inhalation; and built world-class scientific assessment capabilities, including in the areas of aerosol chemistry and physics, pre-clinical systems toxicology and clinical studies, as well as behavioural research and post-market studies. PMI has met strict regulatory requirements in its sector, including in the US, where the FDA has authorised the marketing of a version of PMI's leading heated tobacco product IQOS as a "Modified Risk Tobacco Product" and deemed it 'appropriate for the promotion of public health'. This authorisation marked the first and so far only time that the FDA granted a marketing order for an innovative electronic alternative to cigarettes following a multi-year review of PMI's extensive scientific evidence package.

The critical next leg in PMI's transformation is leveraging this expertise and capabilities to expand into products beyond tobacco and nicotine, as part of a natural evolution in to a broader healthcare and wellness company. In February 2021, it announced its ambition to generate at least $1 billion in annual net revenues from Beyond Nicotine products by 2025, and identified respiratory drug delivery and selfcare wellness products, such as botanicals, as key focus corridors. This ambition is founded on PMI's strong understanding of aerosolisation and respiratory technology, its promising product development pipeline, and its willingness to continue investing in research and development, manufacturing and commercialisation. A combination of expertise in life sciences, inhalation technology, the use of natural ingredients, commercial deployment and experience of how to change consumer behaviour is the strong foundation for PMI's Beyond Nicotine business.

In addition to its existing capabilities, PMI has developed a pipeline focused on inhaled therapeutics and selfcare wellness products for a wide variety of applications, for example within cardiovascular and pain management. PMI has allocated significant resources to research and development and equity investments, with a focus on addressable segments, including but not limited to cardiovascular diseases and pain management, in addition to a number of selfcare wellness remedies.

   4.         Vectura Recommendation

On 26 May 2021, Vectura and Murano, a newly formed company indirectly controlled by funds managed by Carlyle Europe Partners V, announced that they had agreed the terms of an acquisition of the entire issued and to be issued ordinary share capital of Vectura by Murano, to be implemented by scheme of arrangement (the "Carlyle Offer"). The scheme document in respect of the Carlyle Offer was published on 18 June 2021 which included a unanimous recommendation from the Vectura Directors to the Vectura Shareholders to vote in favour of the Carlyle Offer at the Carlyle Offer Shareholder Meetings.

In light of the superior proposal per Vectura Share put forward by PMI Bidder as compared to the offer made by Murano, the Vectura Directors, who have been so advised by J.P. Morgan Cazenove and Rothschild & Co as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing their financial advice to the Vectura Directors, J.P. Morgan Cazenove and Rothschild & Co have taken into account the commercial assessments of the Vectura Directors. Rothschild & Co is providing independent financial advice to the Vectura Directors for the purposes of Rule 3 of the Takeover Code.

Accordingly, the Vectura Directors intend to recommend unanimously that Vectura Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Vectura General Meeting, each to be convened in due course. The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings.

   5.         Background to and reasons for the recommendation

At the time of the Carlyle Offer, the Vectura Directors concluded that the Carlyle Offer reflected the strength of the Vectura business today and its future prospects, and provided an opportunity for Vectura Shareholders to realise their investment in Vectura in cash in the near term. While the Vectura Directors believe the Vectura Group is well positioned for future continued success and that the long-term prospects of the Vectura Group are strong as an independent listed entity, it also recognises that uncertainties exist, many of which are beyond Vectura's control, all of which have been covered in the Carlyle Offer announcement.

The PMI Offer is a material increase and represents a significantly higher cash price per share to Vectura Shareholders.

The Vectura Directors note that PMI intends to operate Vectura as an autonomous business unit that will form the backbone of PMI's inhaled therapeutic business. Vectura Directors have also noted that PMI intends to increase the total level of expenditure on research and development that will further benefit Vectura's differentiated technologies and development expertise for the delivery of complex inhaled therapeutics.

Against this backdrop, the Vectura Directors have carefully considered the terms of PMI's Offer and note that:

   --          the Cash Consideration of 150 pence per Vectura Share represents:

-- an increase of 14 pence (or 10 per cent.) in cash for each Vectura Share as compared to the cash consideration under the Carlyle Offer of 136 pence per Vectura Share;

-- a premium of 55 per cent. to the volume weighted average Ex-Dividend Closing Price per of 97 pence per Vectura Share for the 3 months ended 25 May 2021 (being the last Business Day prior to the announcement of the Carlyle Offer); and

-- a premium of approximately 46 per cent. to the Ex-Dividend Closing Price per Vectura Share of 103 pence on 25 May 2021 (being the last Business Day prior to the announcement of the Carlyle Offer).

   --          the Acquisition Value of 169 pence per Vectura Share represents:

-- an increase of 14 pence (or 9 per cent.) in cash for each Vectura Share as compared to the acquisition value of 155 pence in cash for each Vectura Share under the Carlyle Offer; and

-- an implied adjusted enterprise value multiple of approximately 13.9x Vectura's adjusted EBITDA of GBP61 million for the 12 month period ended 31 December 2020.

Furthermore, the Vectura Directors have also had regard to PMI's intentions for the business, management and employees of Vectura. The Vectura Directors are pleased to note the great importance attached by PMI to the skills, knowledge and expertise of Vectura's management and employees in executing its strategy.

Accordingly, following careful consideration of the above factors, the Vectura Directors intend unanimously to recommend the Acquisition to Vectura Shareholders. The Vectura Directors have withdrawn their recommendation of the Carlyle Offer and will adjourn the Carlyle Offer Shareholder Meetings.

   6.         Information on the PMI Group and PMI Bidder

In 2016 PMI announced its new purpose: to deliver a smoke-free future by focusing its resources on developing, scientifically substantiating and responsibly commercializing smoke-free products that are less harmful than smoking, with the aim of completely replacing cigarettes as soon as possible. This commitment was reaffirmed last year by PMI's Board of Directors in its Statement of Purpose, which explains how PMI is disrupting its business from the inside, leading the industry toward a future without cigarettes, acknowledging stakeholders, and ensuring the long-term success of the company.

As of March 31, 2021, PMI estimates that 14.0 million adults around the world have already switched to its IQOS heated tobacco product and stopped smoking, with a further 5.1 million IQOS users in various stages of conversion. PMI's smoke-free products are available for sale in 66 markets in key cities or nationwide. In the US, a version of IQOS has received marketing authorisation from the FDA under the premarket tobacco product application (PMTA) pathway; the FDA has also authorised the marketing of a version of IQOS and its consumables as a Modified Risk Tobacco Product (MRTP), finding that an exposure modification order for these products is appropriate to promote the public health.

By the end of 2020, PMI's smoke-free products accounted for almost a quarter of its total net revenues, compared to essentially zero in 2015. In February of this year, PMI announced the goal for its smoke-free products to account for more than 50% of its total net revenues by 2025, and to generate at least $1 billion in annual net revenues from Beyond Nicotine products in 2025.

PMI Bidder is a Delaware corporation having its registered seat at 120, Park Avenue New York, 10017 New York, United States, and is a wholly owned direct subsidiary of PMI.

   7.         Information on Vectura

Vectura is a public limited company registered in England and Wales. The Vectura Shares are listed on the Official List of the London Stock Exchange.

Vectura is a provider of innovative inhaled drug delivery solutions that enable partners to bring their medicines to patients. With differentiated proprietary technology and pharmaceutical development expertise, Vectura is one of the few companies globally with the device, formulation and development capabilities to deliver a broad range of complex inhaled therapies.

Vectura has thirteen key inhaled and eleven non--inhaled products marketed by major global pharmaceutical partners with global royalty streams, and a diverse partnered portfolio of drugs in clinical development.

   8.         Strategy, directors, management, employees, research and development and locations

PMI's Acquisition is part of a long-term commitment to the transformation of its business, not a search for short term gains and efficiency. PMI intends that Vectura would operate as an autonomous business unit of PMI following the Acquisition and sees employees as a key part of the Acquisition.

PMI believes that one of the major reasons Vectura has achieved the success they have to date is due in large part to the scientific & technical capabilities of the company, the diversity of Vectura's management and the strength of its workforce. The continuity of Vectura's management team and workforce is therefore critical to PMI's long-term goals. PMI has no intention of making any material changes to the conditions of employment for management or employees and intends to further invest in Vectura's capabilities and expertise, to maintain robust leadership development practices as well as the long-term employability of its workforce to further secure and boost its success over time.

As a Fortune 500 company with around 70,000 employees worldwide, PMI can provide long-term employee development and financial stability.

PMI intends to ensure business continuity in the delivery of Vectura's existing business lines and would continue with already announced plans regarding Vectura's headquarters and operations and has no plans for other changes to operations and locations.

Vectura's organisation and science will be a cornerstone of PMI's inhaled therapeutic and wellness propositions of the future. PMI believes that its Beyond Nicotine aerosolisation technologies and development pipeline would provide additional predictability, stability, and security for the future and would complement Vectura's current CDMO activities.

PMI is fully aware of Vectura's capabilities in the inhalation segment and has strong belief in its ability to innovate and support drug development in this segment. In addition to products currently in the pipeline, PMI believes that Vectura's platform and technology can also benefit from PMI's developing pipeline and that the Acquisition will facilitate the augmentation of the combined product portfolio of Vectura and PMI. PMI is supportive of Vectura's current strategy to become one of the leading CDMOs in this segment. PMI further believes that a combination with PMI can bring Vectura significant institutional knowledge, commercial scale, experience in relevant areas and greater financial flexibility and capacity.

Prior to this announcement, consistent with market practice, PMI has been granted access to Vectura's senior management for the purposes of confirmatory due diligence.

Employees and management

PMI believes that one of the major reasons Vectura has achieved the success they have to date is due in no small part to the strength, scientific & technical capabilities and diversity of Vectura's management and the deep scientific expertise of its employees.

Vectura's management and employees will continue to be key to its future success which will be complemented and enhanced by the PMI Group's current capabilities and resources evidenced by PMI's standing as a widely recognised top employer and leader in gender equality, equitable pay, and environmental, social and corporate governance measures. Such recognitions include being:

   --      the first international company to achieve global EQUAL-SALARY certification; 
   --      included in the 2021 Bloomberg Gender-Equity Index; 
   --      a certified Global Top Employer for five consecutive years by the Top Employers Institute;

-- ranked on CDP's A list for climate change for seven years in a row and awarded CDP's "triple A" score in 2020 for efforts to combat climate change and the protection of forests and water security; and

   --      included in the Dow Jones Sustainability Index North America.

PMI sees Vectura's management team presence and continuity as a critical component of the value of the company and PMI's long term ambitious strategic goals along with the expertise and skills possessed by employees throughout the Company. As such, PMI has no intention of making any material changes to the conditions of employment, nor does PMI intend to make any changes to the balance of skills and functions of Vectura's employees and management. PMI intends to further invest in people capabilities and expertise, and maintain Vectura's robust leadership development practices, as well as the long-term employability of its employees to further secure and boost its success over time.

There may be some limited restructuring required following completion of the Acquisition. In particular, once Vectura ceases to be a listed company, certain corporate and support functions relating to Vectura's status as a listed company may potentially require limited reductions in headcount. Other than in certain corporate and support functions relating to Vectura's status as a listed company, PMI does not intend to make any other headcount reductions, including in the UK.

It is intended that, upon completion of the Acquisition, each of the non-executive members of the Vectura Board shall resign from his or her office as a director of Vectura. Separately, PMI intends to approach select non-executive board members following the Acquisition to explore how their expertise and experience may be of value to guiding the continued development of the business under PMI's ownership, although no such discussions have taken place thus far.

Existing rights and pensions

PMI confirms that, following the Acquisition becoming Effective, the existing contractual and employment rights, including Vectura's pension schemes, of Vectura's management and employees will be respected in accordance with applicable law.

PMI does not intend to make any material changes to the terms & conditions of Vectura's pension schemes, including the employer contributions, accrual of benefits for existing members or the rights of admission of new members.

Management incentivisation arrangements

PMI believes that the value of Vectura is driven by its management and employees and while PMI has not entered into, and has not discussed any form of incentivisation/retention arrangements with, members of Vectura's management, PMI expects to put in place certain incentive arrangements for the management of Vectura following the Acquisition becoming Effective, reflecting the autonomous operation of Vectura under PMI's ownership.

PMI also intends following the Acquisition becoming Effective to provide compensation and incentive programs consistent with Vectura's current compensation schemes, and to establish retention arrangements for Vectura's employees that will be jointly formulated between PMI and Vectura.

Research and development

PMI intends to continue Vectura's existing co-development projects and in-market partnerships and collaborations, and increase the total level of expenditure on research and development in line with PMI's plans and ambitions for Vectura.

In addition, PMI expects that joining forces will create an opportunity for Vectura to continue growing the CDMO business - while honouring existing commitments - and at the same time, together with PMI, take the lead in the creation of a fully owned pipeline of products across a broad range of sectors in the inhaled therapeutics and selfcare wellness space. PMI further expects that Vectura will have the opportunity to undertake the development of inhalable drug/device combinations end-to-end, being part of fully integrated teams where DDC is at its core, and utilising capabilities that PMI would be able to provide (such as pre-clinical, clinical, regulatory expertise and global reach). PMI intends to provide funding to conduct device/technology innovation and execute product development, and to bring such innovations to market with a view to enhancing the current pipeline of products.

Headquarters, locations and fixed assets

As disclosed in its Annual Report and Accounts 2020, Vectura intends to move part of its functions from its headquarters in Chippenham to a new Inhalation Centre of Excellence in the South West of England. PMI intends to continue with this transition. PMI does not intend to make any other material changes in the locations of Vectura's headquarters and headquarter functions.

Lyon site

In March 2021 Vectura signed a put option for the sale of the Lyon manufacturing facility. The sale was completed on 9 June 2021.

Muttenz Site

As announced in November 2020, Vectura intends to significantly reduce the research and development operations in Muttenz, Switzerland by 2022 (including in respect of employees). PMI intends to continue with this footprint optimisation.

Save as set out above, PMI Bidder has no intention to change the locations of Vectura's places of business or to redeploy the fixed assets of Vectura.

Trading Facilities

Vectura Shares are currently listed on the Official List and admitted to trading on the London Stock Exchange. As set out in paragraph 13, applications will be made for the cancellation of the listing of Vectura Shares on the Official List and the cancellation of trading of the Vectura Shares on the Main Market of the London Stock Exchange.

   9.         Vectura Share Plans

Participants in the Vectura Share Plans shall be contacted regarding the effect of the Scheme on their rights under the Vectura Share Plans and, where necessary, appropriate proposals shall be made to such participants in due course. Further details of the terms of such proposals shall be included in the Scheme Document.

The Scheme will extend to any Vectura Shares issued pursuant to the exercise of options or vesting of awards granted under the Vectura Share Plans at or before the Scheme Record Time. The Scheme will not extend to Vectura Shares issued after the Scheme Record Time. However, it is proposed to amend Vectura's articles of association at the General Meeting to provide that, if the Acquisition becomes Effective, any Vectura Shares issued to any person other than PMI Bidder or its nominees after the Scheme Record Time (including in satisfaction of an option exercised under one of the Vectura Share Plans) will be automatically transferred to PMI Bidder in consideration for the payment by PMI Bidder to those persons of an amount equal to the consideration payable for each Vectura Share so transferred.

Interim Dividend

Participants in the Vectura Share Incentive Plan (SIP), the Vectura Global Share Incentive Plan, the Skyepharma Share Incentive Plan and the Skyepharma International Share Plan participated in the Interim Dividend, in respect of the Vectura Shares they held as at 28 May 2021, in the same way as other Vectura Shareholders. In order to provide participants in the other Vectura Share Plans with the benefit of the Interim Dividend:

-- an amount equal to the amount of the Interim Dividend shall be payable in cash to participants in the 2012 Vectura Long Term Incentive Plan, the 2015 Vectura Long Term Incentive Plan, the Vectura Deferred Share Bonus Plan and the Vectura Global Share Incentive Plan on the exercise or vesting of their awards equal to the value of the Interim Dividend for each Vectura Share received on exercise or vesting; and

-- Vectura shall pay to each participant in the Vectura Approved Share Option Plan, the Vectura Unapproved Share Option Plan and the Vectura Sharesave (SAYE) scheme, an ex gratia cash payment on exercise of their awards equal to the amount of the Interim Dividend multiplied by the number of Vectura Shares received on exercise.

   10.        Financing

The Cash Consideration payable by PMI Bidder under the terms of the Acquisition will be funded from PMI Group's existing cash resources.

BofA Securities, financial adviser to PMI Bidder, is satisfied that sufficient resources are available to satisfy in full the Cash Consideration payable to Vectura Shareholders under the terms of the Acquisition.

   11.        Offer--related arrangements

Confidentiality Agreement

Philip Morris Products S.A. and Vectura entered into a confidentiality agreement dated 7 June 2021 (the "Confidentiality Agreement") pursuant to which an affiliate of PMI Bidder, Philip Morris Products S.A. has undertaken to (i) keep confidential information relating to, inter alia, the Acquisition and Vectura and not to disclose it to third parties (other than to certain permitted parties) unless required by law or regulation; and (ii) use the confidential information only for the purpose of the Acquisition.

These confidentiality obligations shall remain in force for a period of 24 months from the date of the Confidentiality Agreement. This agreement also includes customary non--solicitation obligations on Philip Morris Products S.A. and its affiliates.

Clean Team and Joint Defence Agreement

Philip Morris Products S.A., Vectura and their respective counsel entered into a clean team and joint defence agreement dated 15 June 2021, the purpose of which is to ensure that the exchange and/or disclosure of certain materials relating to the parties and in relation to, in particular, the regulatory workstreams (including foreign investment and antitrust) only takes place between their respective legal counsel and external experts, and does not diminish in any way the confidentiality of such materials and does not result in a waiver of any privilege, right or immunity that might otherwise be available.

Co-operation Agreement

PMI Bidder and Vectura have entered into a co-operation agreement dated on or around the date of this announcement, pursuant to which:

a) PMI Bidder has agreed to incur certain obligations with a view to securing the regulatory clearances and authorisations necessary to satisfy the Regulatory Conditions as soon as reasonably practicable; and

b) PMI Bidder and Vectura have agreed to certain undertakings to co-operate in relation to obtaining such regulatory clearances and authorisations.

The Co-operation Agreement also contains provisions that shall apply in respect of the Vectura Share Plans and certain other employee-related matters.

The Co-operation Agreement shall be terminated with immediate effect if: (i) PMI Bidder and Vectura so agree in writing; (ii) the Acquisition is withdrawn, terminated or lapses in accordance with its terms prior to the Long Stop Date and, where required, with the consent of the Panel (other than in certain limited circumstances); or (iii) unless otherwise agreed by the parties in writing or required by the Panel, the Effective Date has not occurred by the Long Stop Date.

Each of PMI Bidder and Vectura has the right to terminate the Co-operation Agreement if, prior to the Long Stop Date, any Condition is invoked by PMI Bidder (where such invocation has been permitted by the Panel).

PMI Bidder has the right to terminate the Co-operation Agreement if: (i) the Vectura Board announces that it shall not convene the Court Meeting or the General Meeting or that it does not intend to publish the Scheme Document; (ii) in certain circumstances if the Vectura Board otherwise withdraws, adversely modifies or adversely qualifies its recommendation of the Acquisition; (iii) a third party announces a firm intention under the Takeover Code to make an offer for Vectura which is recommended by the Vectura Board, or (iv) a competing proposal becomes effective or is declared or becomes wholly unconditional.

   12.        Structure of and Conditions to the Acquisition

It is intended that the Acquisition shall be effected by means of a Court--approved scheme of arrangement between Vectura and Vectura Shareholders under Part 26 of the Companies Act, although PMI Bidder reserves the right to implement the Acquisition by means of a Takeover Offer (subject to Panel consent).

The purpose of the Scheme is to provide for PMI Bidder to become the holder of the entire issued and to be issued ordinary share capital of Vectura. This is to be achieved by the transfer of the Vectura Shares to PMI Bidder, in consideration for which the Vectura Shareholders shall receive the Cash Consideration per Vectura Share on the basis set out in paragraph 2 of this announcement. The Scheme does not include the acquisition of the Vectura Preference Shares. The holder(s) of the Vectura Preference Shares are entitled to receive notice of and attend, but not vote at, the General Meeting.

The Acquisition shall be subject to the Conditions and further terms set out below and in Appendix I to this announcement and to be set out in the Scheme Document and shall only become Effective if, among other things, the following events occur on or before the Long Stop Date or such later date as may be agreed by PMI Bidder and Vectura (with the Panel's consent and as the Court may approve (if such consent or approval is required)):

(i) the approval of the Scheme by a majority in number of the Vectura Shareholders who are present and vote, whether in person or by proxy, at the Court Meeting and who represent 75 per cent. in value of the Vectura Shares voted by those Vectura Shareholders;

(ii) the resolutions required to approve and implement the Scheme being duly passed by Vectura Shareholders representing at least 75 per cent. of votes cast at the General Meeting (or any adjournment thereof);

(iii) the approval of the Scheme by the Court (with or without modification but subject to any modification being on terms acceptable to Vectura and PMI Bidder);

   (iv)        the delivery of a copy of the Court Order to the Registrar of Companies;

(v) the satisfaction or waiver of the UK National Security and Investment Condition and the German Foreign Investment Condition; and

(vi) approval under the respective merger control rules by the Competition and Consumer Protection Commission of the Republic of Ireland and the Japanese Fair Trade Commission being obtained.

The Scheme shall lapse if:

-- the Court Meeting and the General Meeting are not held by the 22nd day after the expected date of such meetings to be set out in the Scheme Document in due course (or such later date as may be agreed between PMI Bidder and Vectura) and, if required, the Court may allow);

-- the Court Hearing is not held by the 22nd day after the expected date of such hearing to be set out in the Scheme Document in due course (or such later date as may be agreed between PMI Bidder and Vectura) and, if required, the Court may allow); and

   --              the Scheme does not become effective by the Long Stop Date,

provided, however, that the deadlines for the timing of the Court Meeting, the General Meeting and the Court Hearing as set out above may be waived by PMI Bidder, and the deadline for the Scheme to become effective may be extended by agreement between Vectura and PMI Bidder (with the Panel's consent and as the Court may approve (if such consent or approval is required)).

Upon the Scheme becoming effective, it shall be binding on all Vectura Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting (and if they attended and voted, whether or not they voted in favour).

On the Effective Date, share certificates in respect of Vectura Shares shall cease to be valid and entitlements to Vectura Shares held within the CREST system shall be cancelled. The Cash Consideration payable in respect of the Acquisition will be despatched by or on behalf of PMI Bidder to Vectura Shareholders no later than 14 days after the Effective Date.

Further details of the Scheme, including an indicative timetable for its implementation, shall be set out in the Scheme Document which shall be published as soon as practicable and, in any event, (save with the consent of the Panel) within 28 days of this announcement. Subject to satisfaction (or waiver, where applicable) of the Conditions, the Scheme is expected to become effective during H2 2021.

   13.        De--listing and re--registration

Prior to the Scheme becoming effective, it is intended that an application will be made for the cancellation of trading of the Vectura Shares on the London Stock Exchange's main market for listed securities and for the cancellation of the listing of Vectura Shares on the Official List, in each case to take effect following the Effective Date. The last day of dealings in Vectura Shares on the Main Market of the London Stock Exchange is expected to be the Business Day immediately prior to the Effective Date and no transfers shall be registered after 6.00 p.m. on that date.

It is also proposed that, following the Effective Date, Vectura shall be re--registered as a private limited company. A special resolution to approve the re--registration will be proposed at the General Meeting.

   14.        Dividends

   15.        Disclosure of Interests in Vectura

As at the close of business on 8 July 2021 (being the last practicable date prior to the date of this announcement) neither PMI Bidder nor any of its directors nor, so far as PMI Bidder is aware, any person acting in concert (within the meaning of the Takeover Code) with it has (i) any interest in or right to subscribe for any relevant securities of Vectura; (ii) any short positions in respect of relevant Vectura Shares (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery; (iii) any dealing arrangement (of the kind referred to in Note 11 of the definition of Acting in Concert in the Takeover Code) in relation to Vectura Shares or in relation to any securities convertible or exchangeable into Vectura Shares; nor (iv) borrowed or lent any relevant Vectura Shares (including, for these purposes, any financial collateral arrangements of the kind referred to in Note 4 on Rule 4.6 of the Takeover Code), save for any borrowed shares which had been either on--lent or sold.

'Interests in securities' for these purposes arise, in summary, when a person has long economic exposure, whether absolute or conditional, to changes in the price of securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person shall be treated as having an 'interest' by virtue of the ownership, voting rights or control of securities, or by virtue of any agreement to purchase, option in respect of, or derivative referenced to, securities.

It has not been practicable for PMI Bidder to make enquiries of all of its concert parties in advance of the release of this announcement. Therefore, all relevant details in respect of PMI Bidder's concert parties shall be included in the Opening Position Disclosure in accordance with Rule 8.1(a) and Note 2(a)(i) on Rule 8 of the Takeover Code.

   16.        General

PMI Bidder reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of a Takeover Offer for the Vectura Shares as an alternative to the Scheme. In such event, the Takeover Offer shall be implemented on the same terms, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments, including (without limitation) an acceptance condition set at 90 per cent. or such lesser percentage (being more than 50 per cent.) as PMI Bidder may decide or as required by the Panel, of the shares to which such Takeover Offer relates.

The Acquisition shall be made subject to the Conditions and further terms set out in Appendix I to this announcement and to the full terms and conditions which will be set out in the Scheme Document. The bases and sources of certain financial information contained in this announcement are set out in Appendix II to this announcement. Certain terms used in this announcement are defined in Appendix III to this announcement.

It is expected that the Scheme Document and the Forms of Proxy accompanying the Scheme Document shall be published as soon as practicable and, in any event, (save with the consent of the Panel) within 28 days of this announcement. The Scheme Document and Forms of Proxy shall be made available to all Vectura Shareholders at no charge to them.

BofA Securities (as PMI Bidder's financial advisers) and J.P. Morgan Cazenove and Rothschild & Co (as Vectura's financial advisers) have each given and not withdrawn their consent to the publication of this announcement with the inclusion herein of the references to their names in the form and context in which they appear.

   17.        Documents available on website

Copies of the following documents shall be made available on Vectura's website at www.Vectura.com and on PMI's website at www.PMI.com until the Effective Date:

-- the offer--related arrangements or other agreement, arrangement or commitment permitted under, or excluded from, Rule 21 of the Takeover Code, each as referred to in paragraph 11 above;

   --              the letters of consent referred to in paragraph 16 above; and 
   --              this announcement.

Enquiries:

 
 PMI Bidder 
 Investor Relations                             Tel: +41 (0)58 242 4666 
                                                 (Lausanne) 
                                                 Tel: +1 (917) 663 2233 
                                                 (New York) 
 Global Communications                          Tel: +41 (0)58 242 4500 
 David Fraser (International press enquiries) 
 Corey Henry (US press enquiries) 
 BofA Securities, as Financial Adviser          Tel: +44 (0)20 7628 1000 
  to PMI Bidder 
 Christina Dix 
 Geoff Iles 
 James Machin 
 Jack Williams 
 Sanctuary Counsel, PR Adviser to PMI           Tel: +44 (0)20 8194 3180 
 Ben Ullmann 
 Robert Morgan 
 Foxcroft Consulting, PR Adviser to             Tel: +1 212 300 4929 
  PMI 
 Hilary Lefebvre 
 Vectura                                        Tel: +44 (0)20 7881 0524 
 Will Downie (Chief Executive Officer) 
 Paul Fry (Chief Financial Officer) 
 J.P. Morgan Cazenove, as Joint Financial       Tel: +44 (0)20 7742 4000 
  Adviser and Joint Corporate Broker 
  to Vectura 
 James Mitford 
 Celia Murray 
 Alex Bruce 
 Hemant Kapoor 
 Rothschild & Co, as Joint Financial            Tel: +44 (0)20 7280 5000 
  Adviser to Vectura 
 Julian Hudson 
 Vincent Meziere 
 Toby Wright 
 Numis, Joint Corporate Broker to Vectura       Tel: +44 (0)20 7260 1000 
 James Black 
 FTI Consulting, PR Adviser to Vectura          Tel: +44 (0)20 727 1000 
 Ben Atwell                                     Email:SCVectura@fticonsulting.com 
 Simon Conway 
 Public Enquiries 
 David Ginivan                                  Tel: +44 (0)7471 352 
                                                 720 
 Analyst/Investor Enquiries 
 Olivia Manser                                  Tel: +44 (0)7947 758 
                                                 259

DLA Piper UK LLP is retained as legal adviser to PMI and PMI Bidder.

Clifford Chance LLP is retained as legal adviser to Vectura.

Important Notices

Further information

This announcement does not constitute a prospectus or prospectus exempted document.

Overseas Shareholders

The Acquisition shall be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the Financial Conduct Authority.

Additional information for US investors

Vectura is organised under the laws of a country other than the United States. Some or all of the officers and directors of Vectura are residents of countries other than the United States. In addition, most of the assets of Vectura are located outside the United States. As a result, it may be difficult for US shareholders of Vectura to effect service of process within the United States upon Vectura or its officers or directors or to enforce against them a judgment of a US court predicated upon the federal or state securities laws of the United States.

Forward-Looking Statements

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for PMI Bidder or Vectura, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for PMI Bidder or Vectura, as appropriate.

Disclosure requirements of the Takeover Code

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at http://www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Electronic communications

Publication on website and availability of hard copies

A copy of this announcement shall be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on Vectura's website at www.Vectura.com and on PMI Bidder's website at www.PMI.com by no later than 12 noon (London time) on the business day following the date of this announcement. For the avoidance of doubt, the contents of this website are not incorporated into and do not form part of this announcement.

Rounding

General

Investors should be aware that PMI Bidder may purchase Vectura Shares otherwise than under any Takeover Offer or the Scheme such as pursuant to privately negotiated purchases.

Appendix I

Conditions and Further Terms of the Acquisition

Part A: Conditions of the Scheme and the Acquisition

1. The Acquisition is conditional upon the Scheme becoming unconditional and effective, subject to the Takeover Code, by not later than the Long Stop Date.

   2.         The Scheme shall be subject to the following conditions:

2.1

(i) its approval by a majority in number of the Vectura Shareholders who are present and vote, whether in person or by proxy, at the Court Meeting and who represent 75 per cent. or more in value of the Vectura Shares voted by those Vectura Shareholders; and

(ii) such Court Meeting being held on or before the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed by PMI Bidder and Vectura and, if required, the Court may allow);

2.2

(i) the resolutions required to implement the Scheme being duly passed by Vectura Shareholders representing 75 per cent. or more of votes cast at the General Meeting; and

(ii) such General Meeting being held on or before the 22nd day after the expected date of the General Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed by PMI Bidder and Vectura and, if required, the Court may allow);

2.3

(i) the sanction of the Scheme by the Court (with or without modification but subject to any modification being on terms acceptable to Vectura and PMI Bidder) and the delivery of a copy of the Court Order to the Registrar of Companies; and

(ii) the Court Hearing being held on or before the 22nd day after the expected date of the Court Hearing to be set out in the Scheme Document in due course (or such later date as may be agreed by PMI Bidder and Vectura and, if required, the Court may allow).

3. In addition, subject as stated in Part B below and to the requirements of the Panel, the Acquisition shall be conditional upon the following Conditions and, accordingly, the Court Order shall not be delivered to the Registrar of Companies unless such Conditions (as amended if appropriate) have been satisfied or, where relevant, waived:

Republic of Ireland

   (a)        the occurrence of one of the following events:

(i) the Irish Competition and Consumer Protection Commission (the "Irish Authority") having informed PMI Bidder and Vectura in writing under section 21(2)(a) of the Irish Competition Act 2002 - 2017 (the "Irish Competition Act") that the Acquisition may be put into effect without any proposals from any of the parties under section 20(3) of the Irish Competition Act being taken into account;

(ii) the period specified in section 21(2) of the Irish Competition Act having lapsed without the Irish Authority having informed the parties of the determination (if any) it has made under the said section;

(iii) the period of 120 working days after the relevant appropriate date having elapsed without the Irish Authority having made a determination under section 22(3) of the Irish Competition Act in relation to the Acquisition (the "Irish Antitrust Condition");

Japan

(b) following the filing of a notification of the Acquisition under the Law relating to Prohibition of Private Monopolisation and Maintenance of Fair Trade (Law No. 54 of 14 April 1947, as amended (the "Law")):

(i) the waiting period (i.e., thirty calendar days, or any shorter period if designated by the Japan Fair Trade Commission (the "JFTC") in its notification of shortening the waiting period, following the date of the notification (the "Waiting Period")) has expired; and

(ii) the JFTC has issued to PMI Bidder, within the Waiting Period or, if the JFTC has requested PMI Bidder to submit necessary reports, information or materials (the "Reports") under Paragraph 9, Article 10 of the Law (including mutatis mutandis application under the Law) during the Waiting Period, within one hundred and twenty calendar days following the date of the notification or ninety calendar days following the date of the JFTC's acceptance of all the Reports, whichever is later, a written notice confirming the JFTC's decision not to issue a cease and desist order without attaching to its decision any conditions or obligations (the "Japanese Antitrust Condition");

UK National Security and Investment

(c)

(i) in the event that the National Security and Investment Act 2021 (the "NSI Act") comes into force before the Effective Date and PMI Bidder and Vectura, acting reasonably, agree that a mandatory notification is required under the NSI Act; or

   (ii)         in response to a voluntary notification in relation to the NSI Act,

the Secretary of State for Business, Energy and Industrial Strategy informing PMI Bidder that the Acquisition does not give rise to concerns necessitating further action on its part ("UK National Security and Investment Condition");

German Foreign Investment

(d) the German Ministry for Economic Affairs and Energy (Bundesministerium f ür Wirtschaft and Energie):

(i) having either issued a certificate of non--objection (Unbedenklichkeitsbescheinigung) pursuant to Sec. 58(1) sentence 1 of the Foreign Trade and Payments Ordinance (Au <BETA>enwirtschaftsverordnung, the "AWV") or a clearance decision pursuant to Sec. 58a(1) sentence 1 AWV (Freigabe) in relation to the Acquisition (hereinafter, each a "Formal Decision"), or

(ii) having neither issued a Formal Decision nor initiated a formal investigation pursuant to Sec. 55(1), (3) AWV within the statutory review period pursuant to Sec. 14a(1) no. 1, (3), (5) of the Foreign Trade and Payments Act (Au <BETA>enwirtschaftsgesetz, the "AWG"), in relation to the Acquisition after receipt of a due application for a Formal Decision, or

(iii) having, in the event of a formal investigation pursuant to Sec 55(1), (3) AWV, approved the Acquisition by issuing a Formal Decision, or

(iv) failed to prohibit the Acquisition within the period specified in Sec. 59(1) AWV in conjunction with Sec. 14a(1) no. 2, (4), (5), (6) and (7) AWG, or

(v) having declared in writing that the Acquisition can be closed without having obtained prior approval by the German Ministry for Economic Affairs and Energy ("German Foreign Investment Condition"),

provided that the German Foreign Investment Condition shall be deemed to be satisfied at the time upon which each of the Irish Antitrust Condition and the Japanese Antitrust Condition have been satisfied or waived or confirmed or are inapplicable, save that where (i) before such time, the German Ministry for Economic Affairs and Energy has informed PMI Bidder and/or Vectura that the Acquisition cannot be closed without having obtained prior approval by the German Ministry for Economic Affairs and Energy, or (ii) PMI Bidder and Vectura, acting reasonably, agree that it can reasonably be assumed that the German Ministry for Economic Affairs and Energy believes this to be the case;

Notifications, waiting periods and Authorisations

(e) excluding the Conditions set out under paragraphs 3(a) to (d) above, all notifications, filings or applications which are necessary or reasonably considered necessary by PMI Bidder having been made in connection with the Acquisition and all necessary waiting periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory and regulatory obligations in any jurisdiction having been complied with in each case in respect of the Acquisition and all Authorisations deemed reasonably necessary or appropriate by PMI Bidder in any jurisdiction for or in respect of the Acquisition and, except pursuant to Chapter 3 of Part 28 of the Companies Act, the acquisition or the proposed acquisition of any shares or other securities in, or control or management of, Vectura or any other member of the Wider Vectura Group by any member of the Wider PMI Group having been obtained in terms and in a form reasonably satisfactory to PMI Bidder from all appropriate Relevant Authorities or (without prejudice to the generality of the foregoing) from any person or bodies with whom any member of the Wider Vectura Group or the Wider PMI Group has entered into contractual arrangements and all such Authorisations necessary, appropriate or desirable to carry on the business of any member of the Wider Vectura Group in any jurisdiction having been obtained and all such Authorisations remaining in full force and effect at the time at which the Acquisition becomes otherwise wholly unconditional and there being no notice or intimation of an intention to revoke, suspend, restrict, modify or not to renew such Authorisations;

General antitrust and regulatory

(f) excluding the Conditions set out under paragraphs 3(a) to (d) above, no Relevant Authority having given notice of a decision to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference (and in each case, not having withdrawn the same), or having required any action to be taken or otherwise having done anything, or having enacted, made or proposed any statute, regulation, decision, order or change to published practice (and in each case, not having withdrawn the same) and there not continuing to be outstanding any statute, regulation, decision or order which would or might reasonably be expected to:

(i) require, prevent or materially delay the divestiture or materially alter the terms envisaged for such divestiture by any member of the Wider PMI Group or by any member of the Wider Vectura Group of all or any material part of its businesses, assets or property or impose any limitation on the ability of all or any of them to conduct their businesses (or any part thereof) or to own, control or manage any of their assets or properties (or any part thereof) to an extent which is material in the context of the Wider PMI Group or the Wider Vectura Group, in either case taken as a whole;

(ii) other than pursuant to Chapter 3 of Part 28 of the Companies Act, require any member of the Wider PMI Group or the Wider Vectura Group to acquire or offer to acquire any shares, other securities (or the equivalent) or interest in any member of the Wider Vectura Group or any asset owned by any Relevant Authority (other than in the implementation of the Acquisition), which is material in the context of the Wider PMI Group or the Wider Vectura Group, in either case taken as a whole;

(iii) impose any material limitation on, or result in a material delay in, the ability of any member of the Wider PMI Group directly or indirectly to acquire, hold or to exercise effectively all or any rights of ownership in respect of shares or other securities in Vectura or on the ability of any member of the Wider Vectura Group or any member of the Wider PMI Group directly or indirectly to hold or exercise effectively all or any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise voting or management control over, any member of the Wider Vectura Group to an extent which is material in the context of the Wider Vectura Group or the Wider PMI Group, in either case taken as a whole;

(iv) otherwise materially adversely affect any or all of the business, assets, profits or prospects of any member of the Wider Vectura Group or any member of the Wider PMI Group;

(v) result in any member of the Wider Vectura Group or the Wider PMI Group ceasing to be able to carry on business under any name under which it presently carries on business;

(vi) make the Acquisition, its implementation or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, Vectura by any member of the Wider PMI Group void, unenforceable and/or illegal under the laws of any relevant jurisdiction, or otherwise, directly or indirectly, materially prevent or prohibit, restrict, restrain, or delay or otherwise to a material extent or otherwise materially interfere with the implementation of, or impose material additional conditions or obligations with respect to, or otherwise materially challenge, impede, interfere or require material amendment of the Acquisition or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, Vectura by any member of the Wider PMI Group;

(vii) require, prevent or materially delay a divestiture by any member of the Wider PMI Group of any shares or other securities (or the equivalent) in any member of the Wider Vectura Group or any member of the Wider PMI Group; or

(viii) impose any limitation on the ability of any member of the Wider PMI Group of any member of the Wider Vectura Group to conduct, integrate or co--ordinate all or any part of its business with all or any part of the business of any other member of the Wider PMI Group and/or the Wider Vectura Group which is material in the context of the Wider Vectura Group or the Wider PMI Group, in either case taken as a whole,

and all applicable waiting and other time periods (including any extensions thereof) during which any such Relevant Authority could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Acquisition or the acquisition or proposed acquisition of any Vectura Shares or otherwise intervene having expired, lapsed or been terminated;

Certain matters arising as a result of any arrangement, agreement, etc.

(g) except as Disclosed, there being no provision of any arrangement, agreement, lease, licence, franchise, permit or other instrument to which any member of the Wider Vectura Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or be subject or any event or circumstance which, as a consequence of the Acquisition or the acquisition or the proposed acquisition by any member of the Wider PMI Group of any shares or other securities (or the equivalent) in Vectura or because of a change in the control or management of any member of the Wider Vectura Group or otherwise, would reasonably be expected to result in, and in each case to an extent which is material in the context of the Wider PMI Group or the Wider Vectura Group as a whole:

(i) any monies borrowed by, or any other indebtedness, actual or contingent, of, or any grant available to, any member of the Wider Vectura Group being or becoming repayable, or capable of being declared repayable, immediately or prior to its or their stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

(ii) the enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider Vectura Group or any such mortgage, charge or other security interest (whenever created, arising or having arisen) becoming enforceable;

(iii) any liability of any member of the Wider Vectura Group to make any severance, termination, bonus or other payment to any of its directors, or other officers;

(iv) the rights, liabilities, obligations, interests or business of any member of the Wider Vectura Group or any member of the Wider PMI Group under any such arrangement, agreement, licence, permit, lease or instrument or the interests or business of any member of the Wider Vectura Group or any member of the Wider PMI Group in or with any other person or body or firm or company (or any arrangement or arrangement relating to any such interests or business) being or becoming capable of being terminated, or adversely modified or affected or any onerous obligation or liability arising or any adverse action being taken thereunder;

(v) any member of the Wider Vectura Group ceasing to be able to carry on business under any name under which it presently carries on business;

(vi) the value of, or the financial or trading position or prospects of, any member of the Wider Vectura Group being prejudiced or adversely affected; or

(vii) the creation or acceleration of any liability (actual or contingent) by any member of the Wider Vectura Group other than trade creditors or other liabilities incurred in the ordinary course of business,

and no event having occurred which, under any provision of any arrangement, agreement, licence, permit, franchise, lease or other instrument to which any member of the Wider Vectura Group is a party or by or to which any such member or any of its assets are bound, entitled or subject, would, or would reasonably be expected to, result in any of the events or circumstances as are referred to in Conditions 3(g)(i) to (vii));

Certain events occurring since 31 December 2020

   (h)        except as Disclosed, no member of the Wider Vectura Group having since 31 December 2020:

(i) save as between Vectura and its wholly owned subsidiaries or between such wholly owned subsidiaries and save for the issue or transfer out of treasury of Vectura Shares on the exercise of options or vesting of awards granted in the ordinary course under the Vectura Share Plans issued or agreed to issue or authorised or proposed or announced its intention to authorise or propose the issue, of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares, securities or convertible securities or transferred or sold or agreed to transfer or sell or authorised or proposed the transfer or sale of Vectura Shares out of treasury (except, where relevant, as between Vectura and wholly owned subsidiaries of Vectura or between the wholly owned subsidiaries of Vectura and except for the issue or transfer out of treasury of Vectura Shares on the exercise of employee share options or vesting of employee share awards in the ordinary course under the Vectura Share Plans);

(ii) except for the Interim Dividend (and except for the recommendation only of the Special Dividend), recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution (whether payable in cash or otherwise) other than dividends (or other distributions whether payable in cash or otherwise) lawfully paid or made by any wholly owned subsidiary of Vectura to Vectura or any of its wholly owned subsidiaries;

(iii) other than pursuant to the Acquisition (and except for transactions between Vectura and its wholly owned subsidiaries or between the wholly owned subsidiaries of Vectura) implemented, effected, authorised or proposed or announced its intention to implement, effect, authorise or propose any merger, demerger, reconstruction, amalgamation, scheme, commitment or acquisition or disposal of assets or shares or loan capital (or the equivalent thereof), in any undertaking or undertakings and in each case to an extent which is material in the context of the Wider Vectura Group taken as a whole;

(iv) except for transactions between Vectura and its wholly owned subsidiaries or between the wholly owned subsidiaries of Vectura disposed of, or transferred, mortgaged or created any security interest over any material asset or any right, title or interest in any material asset or authorised, proposed or announced any intention to do so, to an extent which, in each case, is material in the context of the Wider Vectura Group taken as a whole;

(v) except for transactions between Vectura and its wholly owned subsidiaries or between the wholly owned subsidiaries of Vectura, issued, authorised or proposed or announced an intention to authorise or propose, the issue of or made any change in or to the terms of any debentures or become subject to any contingent liability or incurred or increased any indebtedness to an extent which, in each case, is material in the context of the Wider Vectura Group taken as a whole;

(vi) entered into or varied or authorised, proposed or announced its intention to enter into or vary any material contract, arrangement, agreement, transaction or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, unusual or onerous nature or magnitude or which is or which involves or could involve an obligation of a nature or magnitude which is reasonably likely to be materially restrictive on the business of any member of the Wider Vectura Group to an extent which, in each case, is material in the context of the Wider Vectura Group taken as a whole;

(vii) entered into or varied the terms of, or made any offer (which remains open for acceptance) to enter into or vary to a material extent the terms of any contract, service agreement, commitment or arrangement with any director or, senior executive of any member of the Wider Vectura Group save for salary increases or bonuses in the ordinary course;

(viii) proposed, agreed to provide or modified the terms of any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any employee of the Wider Vectura Group, which is material in the context of the Wider Vectura Group taken as a whole;

(ix) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, except in respect of the matters mentioned in sub--paragraph (i) above, made any other change to any part of its share capital to an extent which is material in the context of the Wider Vectura Group as a whole;

(x) waived, compromised or settled any claim which is material in the context of the Wider Vectura Group taken as a whole;

(xi) terminated or varied the terms of any agreement or arrangement between any member of the Wider Vectura Group and any other person in a manner which would, or would reasonably be expected to, have a material adverse effect on the financial position of the Wider Vectura Group taken as a whole;

(xii) made any material alteration to its memorandum or articles of association or other incorporation documents (in each case, other than in connection with the Scheme);

(xiii) except in relation to changes made or agreed as a result of, or arising from, changes to legislation, made or agreed or consented to any significant change to:

(A) the terms of the trust deeds and rules constituting the pension scheme(s) established by any member of the Wider Vectura Group for its directors, employees or their dependants;

(B) the contributions payable to any such scheme(s) or to the benefits which accrue, or to the pensions which are payable, thereunder;

(C) the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined; or

(D) the basis upon which the liabilities (including pensions) of such pension schemes are funded, valued, made, agreed or consented to;

(xiv) been unable, or admitted in writing that it is unable, to pay its debts or commenced negotiations with one or more of its creditors with a view to rescheduling or restructuring any of its indebtedness, or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business which is material in the context of the Wider Vectura Group taken as a whole;

(xv) (other than in respect of a member of the Wider Vectura Group which is dormant and was solvent at the relevant time) taken or proposed any steps, corporate action or had any legal proceedings instituted or threatened against it in relation to the suspension of payments, a moratorium of any indebtedness, its winding--up (voluntary or otherwise), dissolution, reorganisation or for the appointment of a receiver, administrator, manager, administrative receiver, trustee or similar officer of all or any material part of its assets or revenues or any analogous or equivalent steps or proceedings in any jurisdiction or appointed any analogous person in any jurisdiction or had any such person appointed;

(xvi) (except for transactions between Vectura and its wholly owned subsidiaries or between the wholly owned subsidiaries), made, authorised, proposed or announced an intention to propose any change in its loan capital;

(xvii) entered into or implemented, any joint venture, asset or profit sharing arrangement, partnership or merger of business or corporate entities which, in each case, is material in the context of the Wider Vectura Group taken as a whole;

(xviii) having taken (or agreed to take) any action which requires or would require, the consent of the Panel or the approval of Vectura Shareholders in general meeting in accordance with, or as contemplated by, Rule 21.1 of the Takeover Code; or

(xix) entered into any agreement, arrangement, commitment or contract or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced an intention to, or to propose to, effect any of the transactions, matters or events referred to in this Condition 3(h);

No adverse change, litigation, regulatory enquiry or similar

   (i)         except as Disclosed, since 31 December 2020 there having been:

(i) no adverse change and no circumstance having arisen which would be or be reasonably likely to be expected to result in any material adverse change in, the business, assets, financial or trading position or profits or prospects or operational performance of any member of the Wider Vectura Group to an extent which is material in the context of the Wider Vectura Group taken as a whole;

(ii) no litigation, arbitration proceedings, prosecution or other legal proceedings having been threatened, announced or instituted by or against or remaining outstanding against or in respect of, any member of the Wider Vectura Group or to which any member of the Wider Vectura Group is or is reasonably likely to be a party (whether as claimant, defendant or otherwise) having been threatened, announced, instituted or remaining outstanding by, against or in respect of, any member of the Wider Vectura Group, which, in any such case, would reasonably be expected to have a material adverse effect on the Wider Vectura Group as a whole;

(iii) no enquiry, review or investigation by, or complaint or reference to, any Relevant Authority against or in respect of any member of the Wider Vectura Group having been threatened, announced or instituted or remaining outstanding by, against or in respect of any member of the Wider Vectura Group, which, in any such case, would reasonably be expected to have a material adverse effect on the Wider Vectura Group as a whole;

(iv) no contingent or other liability having arisen or become apparent to PMI Bidder or increased other than in the ordinary course of business which is reasonably likely to affect materially and adversely the business, assets, financial or trading position or profits or prospects of any member of the Wider Vectura Group to an extent which is material in the context of the Wider Vectura Group taken as a whole;

(v) no member of the Wider Vectura Group having conducted its business in breach of applicable laws and regulations in a manner which is material in the context of the Wider Vectura Group as a whole; and

(vi) no steps having been taken and no omissions having been made which are reasonably likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider Vectura Group which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which is material and likely to have an adverse effect on the Wider Vectura Group taken as a whole;

No discovery of certain matters regarding information, liabilities and environmental issues

   (j)         except as Disclosed, PMI Bidder not having discovered since 31 December 2020:

(i) that any financial, business or other information concerning the Wider Vectura Group publicly announced prior to the date of this announcement or disclosed to any member of the Wider PMI Group by or on behalf of any member of the Wider Vectura Group prior to the date of this announcement is misleading, contains a material misrepresentation of any fact, or omits to state a fact necessary to make that information not misleading, and which is, in any case, material in the context of the Wider Vectura Group taken as a whole;

(ii) that any member of the Wider Vectura Group or any partnership, company or other entity in which any member of the Wider Vectura Group has a significant economic interest and which is not a subsidiary undertaking of Vectura is subject to any liability, contingent or otherwise and which is material in the context of the Wider Vectura Group taken as a whole;

(iii) any information which affects the impact of any information disclosed at any time by or on behalf of the Wider Vectura Group and which is material in the context of the Wider Vectura Group taken as a whole;

(iv) that any past or present member of the Wider Vectura Group has not complied in any material respect with all applicable legislation, regulations or other requirements of any jurisdiction or any Authorisations relating to the use, treatment, storage, carriage, disposal, discharge, spillage, release, leak or emission of any waste or hazardous substance or any substance likely to impair the environment (including property) or harm human or animal health or otherwise relating to environmental matters or the health and safety of humans, which non--compliance would be likely to give rise to any liability including any penalty for non--compliance (whether actual or contingent) on the part of any member of the Wider Vectura Group which is material in the context of the Wider Vectura Group taken as a whole;

(v) that there has been a material disposal, discharge, spillage, accumulation, release, leak, emission or the migration, production, supply, treatment, storage, transport or use of any waste or hazardous substance or any substance likely to impair the environment (including any property) or harm human or animal health which (whether or not giving rise to non--compliance with any law or regulation), would be likely to give rise to any material liability (whether actual or contingent) on the part of any member of the Wider Vectura Group;

(vi) that there is or is reasonably likely to be any material obligation or liability (whether actual or contingent) or requirement to make good, remediate, repair, reinstate or clean up any property, asset or any controlled waters currently or previously owned, occupied, operated or made use of or controlled by any past or present member of the Wider Vectura Group (or on its behalf), or in which any such member may have or previously have had or be deemed to have had an interest, under any environmental legislation, common law, regulation, notice, circular, Authorisation or order of any Relevant Authority in any jurisdiction or to contribute to the cost thereof or associated therewith or indemnify any person in relation thereto in any such case which is material in the context of the Wider Vectura Group taken as a whole; or

(vii) that circumstances exist (whether as a result of making the Acquisition or otherwise) which would be reasonably likely to lead to any Relevant Authority instituting (or whereby any member of the Wider Vectura Group would be likely to be required to institute), an environment audit or take any steps which would in any such case be reasonably likely to result in any actual or contingent liability to improve or install new plant or equipment or to make good, repair, reinstate or clean up any property of any description or any asset now or previously owned, occupied or made use of by any past or present member of the Wider Vectura Group (or on its behalf) or by any person for which a member of the Wider Vectura Group is or has been responsible, or in which any such member may have or previously have had or be deemed to have had an interest, which is material in the context of the Wider Vectura Group taken as a whole;

Anti--corruption, sanctions and criminal property

   (k)        except as Disclosed, PMI Bidder not having discovered that:

(i) any past or present member of the Wider Vectura Group or any person that performs or was performing services for or on behalf of any such company (including any past or present director, officer, employee or agent) is or has, in each case only whilst a member of or performing services for or on behalf of the Wider Vectura Group, engaged in any activity, practice or conduct which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti--corruption legislation;

(ii) any past or present member of the Wider Vectura Group has engaged in any transaction which would cause any member of the Wider PMI Group to be in breach of applicable law or regulation upon completion of the Acquisition, including the economic sanctions of the United States Office of Foreign Assets Control or HM Treasury & Customs, or any government, entity or individual targeted by any of the economic sanctions of the United Nations, United States or the European Union or any of its member states;

(iii) any member of the Wider Vectura Group, or any of their respective directors, officers or employees, is ineligible to be (or any past member of the Wider Vectura Group was, or any past director, officer or employee who was at any time during the course of their engagement with any past or present member of the Wider Vectura Group, ineligible to be) awarded any contract or business under section 23 of the Public Contracts Regulations 2006 or section 26 of the Utilities Contracts Regulations (2006) (each as amended); or

(iv) any asset of any member of the Wider Vectura Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition).

Part B: Certain further terms of the Acquisition

   1.         Subject to the requirements of the Panel, PMI Bidder reserves the right to waive:

(i) the deadline set out in Condition 1 and any of the deadlines set out in Condition 2 for the timing of the Court Meeting, the General Meeting and/or the Court Hearing. If any such deadline is not met, PMI Bidder shall make an announcement by 8.00 a.m. on the Business Day following such deadline confirming whether it has invoked or waived the relevant Condition or agreed with Vectura to extend the deadline in relation to the relevant Condition; and

   (ii)         in whole or in part, all or any of the above Conditions 3(a) to 3(k) (inclusive).

2. If PMI Bidder is required by the Panel to make an offer for Vectura Shares under the provisions of Rule 9 of the Takeover Code, PMI Bidder may make such alterations to any of the above Conditions and terms of the Acquisition as are necessary to comply with the provisions of that Rule.

   3.         The Acquisition shall lapse and the Scheme shall not become Effective if:

(i) in so far as the Acquisition or any matter arising from or relating to the Scheme or Acquisition constitutes a concentration with a Community dimension within the scope of the Regulation, the European Commission initiates proceedings under Article 6(1)(c) of the Regulation; or

(ii) the Acquisition or any matter arising from or relating to the Scheme or Acquisition becomes subject to a CMA Phase 2 Reference,

in each case, before the date of the Court Meeting.

4. PMI Bidder shall be under no obligation to waive (if capable of waiver), to determine to be or remain satisfied or to treat as fulfilled any of Conditions 3(a) to 3(k) (inclusive) by a date earlier than the latest date for the fulfilment of that Condition notwithstanding that the other Conditions of the Acquisition may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.

5. The Vectura Shares acquired under the Acquisition shall be acquired fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre--emption and any other third party rights and interests of any nature and together with all rights now or hereafter attaching or accruing to them, including, without limitation, voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid, or becomes payable, or any other return of value (whether by reduction of share capital or share premium account or otherwise) made with a record time falling on or after the Effective Time.

6. If, on or after the date of this announcement, any dividend, distribution or other return of value is declared, paid or made, or becomes payable, by Vectura and with a record time falling prior to the Effective Time, PMI Bidder reserves the right (without prejudice to any right of PMI Bidder, with the consent of the Panel, to invoke Condition 3(h)(ii) of this Appendix I) to reduce the Cash Consideration payable under the Acquisition by an amount up to the amount of such dividend, distribution or other return of value. In such circumstances, Vectura Shareholders would be entitled to retain any such dividend, distribution or other return of value declared, made or paid or having become payable.

If on or after the date of this Announcement, and to the extent that any such dividend, distribution or other return of value is declared, paid or made, or becomes payable, prior to the Effective Time and PMI Bidder exercises its rights under this paragraph 6 to reduce the consideration payable under the Acquisition, any reference in this announcement to the Cash Consideration payable shall be deemed to be a reference to the Cash Consideration as so reduced.

If and to the extent that any such dividend, distribution or other return of value has been declared or announced but not paid or made or is not payable by reference to a record time prior to the Effective Time or shall be (i) transferred pursuant to the Acquisition on a basis which entitles PMI Bidder to receive the dividend, distribution or other return of value and to retain it; or (ii) cancelled, the Cash Consideration payable under the Acquisition shall not be subject to change in accordance with this paragraph 6.

PMI Bidder also reserves the right to reduce the Cash Consideration payable under the Acquisition in such circumstances as are, and by such amount as is, permitted by the Panel.

Any exercise by PMI Bidder of its rights referred to in this paragraph 6 shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the Acquisition.

7. PMI Bidder reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of a Takeover Offer for the Vectura Shares as an alternative to the Scheme. In such event, the Takeover Offer shall be implemented on the same terms, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments, including (without limitation) an acceptance condition set at 90 per cent. or such lesser percentage (being more than 50 per cent.) as PMI Bidder may decide or as required by the Panel, of the shares to which such Takeover Offer relates.

8. The availability of the Acquisition to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

9. Unless otherwise determined by PMI Bidder or required by the Takeover Code and permitted by applicable law and regulation, the Acquisition is not being and will not be made, directly or indirectly, in, into or from, or by use of the mails of, or by any means of instrumentality (including, but not limited to, facsimile, e--mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, any jurisdiction where to do so would violate the laws of that jurisdiction.

10. Under Rule 13.5(a) of the Code, PMI Bidder may not invoke a Condition to the Acquisition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the Condition are of material significance to PMI Bidder in the context of the Acquisition. Whether or not such Condition can be invoked would be determined by the Panel. The Conditions in paragraphs 1 and 2 of Part A of this Appendix I are not subject to this provision of the Takeover Code.

11. Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

12. The Acquisition is governed by the law of England and Wales and is subject to the jurisdiction of the English courts and to the Conditions and further terms set out in this Appendix I and to the full terms and conditions which will be set out in the Scheme Document. The Acquisition shall be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the Financial Conduct Authority.

Appendix II

Sources of Information and Bases of Calculation

(i) As at 8 July 2021 (being the last Business Day prior to publication of this announcement), there were 599,485,373 Vectura Shares in issue.

   (ii)         Any references to the issued and to be issued share capital of Vectura are based on:

-- the 599,485,373 Vectura Shares in issue referred to in paragraph (i) above (which includes 570,138 Vectura Shares held in the Vectura Group Employee Benefit Trust and 3,929,511 Vectura Shares in the Vectura Group Employee Share Trust to be used to satisfy options and awards under the Vectura Share Plans); and

-- up to 18,564,664 Vectura Shares which may be issued on or after the date of this announcement to satisfy the exercise of options or vesting of awards pursuant to the Vectura Share Plans.

(iii) The value of the acquisition based on the Acquisition Value of 169 pence per Vectura Share is calculated on the basis of the issued and to be issued share capital of Vectura (as set out in paragraph (ii) above).

(iv) Closing Prices and volume--weighted average prices are taken from Bloomberg and have been rounded to the nearest pence.

   (v)        Where quoted, foreign exchange spot rates are taken from Bloomberg. 
   (vi)        Unless otherwise stated, all prices quoted for Vectura Shares are Closing Prices.

(vii) The adjusted enterprise value of Vectura implied by the Acquisition Value is calculated on the basis of:

a. the issued and to be issued share capital of Vectura (as set out in paragraph (ii) above) multiplied by the Acquisition Value of 169 pence per Vectura Share; minus

b. total enterprise value-to-equity bridge of GBP65.4 million, comprised of GBP78.6 million of cash, net of GBP4.2 million of long/short-term borrowings, GBP2.1 million of retirement benefit obligations and GBP6.9 million of long/short-term provisions, each as at 31 December 2020; and minus

c. GBP127.6 million of cash received relating to the GSK litigation case, as announced on 21 April 2021.

(viii) Vectura's adjusted EBITDA for the 12 months ended 31 December 2020 is calculated by adjusting the operating profit for the non-cash items of depreciation, amortisation and share-based compensation, and for items that are reported as exceptional items, in each case, for the same period.

(ix) Unless otherwise stated, the financial information relating to Vectura is extracted from the audited consolidated financial statements of Vectura for the financial year to 31 December 2020, prepared in accordance with International Financial Reporting Standards.

Appendix III

Definitions

The following definitions apply throughout this announcement unless the context requires otherwise:

 
 Acquisition                       the recommended cash offer being made 
                                    by PMI Bidder to acquire the entire 
                                    issued and to be issued ordinary share 
                                    capital of Vectura not already directly 
                                    or indirectly owned by PMI Bidder 
                                    to be effected by means of a scheme 
                                    of arrangement (or by way of takeover 
                                    offer under certain circumstances 
                                    described in this announcement) and, 
                                    where the context admits, any subsequent 
                                    revision, variation, extension or 
                                    renewal thereof 
 Acquisition Value                 169 pence for each Vectura Share 
 Authorisations                    regulatory authorisations, orders, 
                                    recognitions, grants, consents, clearances, 
                                    confirmations, certificates, determinations, 
                                    licences, permissions, exemptions 
                                    or approvals 
 Beyond Nicotine                   PMI's stated aim of expanding its 
                                    product portfolio beyond tobacco and 
                                    nicotine products 
 BofA Securities                   Merrill Lynch International, a subsidiary 
                                    of Bank of America Corporation, which 
                                    is authorised by the PRA and regulated 
                                    by the FCA and the PRA in the United 
                                    Kingdom 
 Business Day                      a day (other than Saturdays, Sundays 
                                    and public holidays in the UK) on 
                                    which banks are open for business 
                                    in London 
 Carlyle Court Meeting             the meeting of Vectura Shareholders 
                                    convened by order of the Court under 
                                    section 899 of the Companies Act for 
                                    the purpose of considering and, if 
                                    thought fit, approving the scheme 
                                    to implement the Carlyle Offer (with 
                                    or without amendment) and any adjournment 
                                    or postponement thereof, scheduled 
                                    to be held on 12 July 2021 
 Carlyle General Meeting           the general meeting of Vectura Shareholders 
                                    to be convened in connection with 
                                    the Scheme, to consider, and if thought 
                                    fit, approve various matters in connection 
                                    with the Carlyle Offer, including 
                                    any adjournment or postponement thereof, 
                                    scheduled to be held on 12 July 2021

 Carlyle Offer                     the cash offer of 136 pence per Vectura 
                                    Share made for the entire issued and 
                                    to be issued ordinary share capital 
                                    of Vectura made by Murano, to be implemented 
                                    by scheme of arrangement and announced 
                                    on 26 May 2021 
 Carlyle Offer Shareholder         the Carlyle Court Meeting and the 
  Meetings                          Carlyle General Meeting 
 Cash Consideration                150 pence in cash for each Vectura 
                                    Share 
 CDMO                              contract development and manufacturing 
                                    organisation 
 Closing Price                     the closing middle market price of 
                                    a Vectura Share on a particular trading 
                                    day as derived from Bloomberg 
 CMA Phase 2 Reference             a reference of the Acquisition under 
                                    section 33 of the Enterprise Act 2002 
                                    to the chair of the Competition and 
                                    Markets Authority for the constitution 
                                    of a group under Schedule 4 to the 
                                    Enterprise and Regulatory Reform Act 
                                    2013 
 Companies Act                     the Companies Act 2006, as amended 
 Competition and Markets           a UK statutory body established under 
  Authority                         the Enterprise and Regulatory Reform 
                                    Act 2013 
 Conditions                        the conditions to the implementation 
                                    of the Acquisition, as set out in 
                                    Part A of Appendix I to this announcement 
                                    and to be set out in the Scheme Document 
 Co-operation Agreement            the agreement dated on or around the 
                                    date of this announcement between 
                                    PMI Bidder and Vectura relating to, 
                                    among other things, the implementation 
                                    of the Acquisition, as described in 
                                    paragraph 11 of this announcement 
 Court                             the High Court of Justice in England 
                                    and Wales 
 Court Hearing                     the hearing of the Court to sanction 
                                    the Scheme under section 899 of the 
                                    Companies Act and, if such hearing 
                                    is adjourned, reference to commencement 
                                    of any such hearing shall mean the 
                                    commencement of the final adjournment 
                                    thereof 
 Court Meeting                     the meeting of Vectura Shareholders 
                                    to be convened pursuant to an order 
                                    of the Court under the Companies Act 
                                    for the purpose of considering and, 
                                    if thought fit, approving the Scheme 
                                    (with or without amendment), including 
                                    any adjournment thereof, notice of 
                                    which is to be contained in the Scheme 
                                    Document 
 Court Order                       the order of the Court sanctioning 
                                    the Scheme 
 CREST                             a relevant system (as defined in the 
                                    Regulations) for the paperless settlement 
                                    of trades in securities and the holding 
                                    of uncertificated securities operated 
                                    by Euroclear 
 DDC                               Drug Device Combination 
 Dealing Disclosure                has the same meaning as in Rule 8 
                                    of the Takeover Code 
 Disclosed                         any information fairly disclosed by 
                                    or on behalf of Vectura (i) in the 
                                    annual report and accounts of the 
                                    Vectura Group for the financial year 
                                    ended 31 December 2020; (ii) in this 
                                    announcement; (iii) in any other announcement 
                                    to a Regulatory Information Service 
                                    by or on behalf of Vectura prior to 
                                    the publication of this announcement; 
                                    (iv) in the virtual data room operated 
                                    on behalf of Vectura for the purposes 
                                    of the Acquisition (which PMI Bidder 
                                    and/or its advisers were able to access 
                                    prior to the date of this announcement); 
                                    or (v) as otherwise fairly disclosed 
                                    to PMI Bidder (or its officers, employees, 
                                    agents or advisers in their capacity 
                                    as such) in writing or at any management 
                                    presentation prior to the date of 
                                    this announcement by or on behalf 
                                    of Vectura 
 Effective                         in the context of the Acquisition: 
                                    (a) if the Acquisition is implemented 
                                    by way of the Scheme, the Scheme having 
                                    become effective pursuant to its terms; 
                                    or 
                                    (b) if the Acquisition is implemented 
                                    by way of the Takeover Offer, the 
                                    Takeover Offer having been declared 
                                    or become unconditional in all respects 
                                    in accordance with the Code 
 Effective Date                    the date on which either the Scheme 
                                    becomes effective in accordance with 
                                    its terms or, if PMI Bidder elects, 
                                    and the Panel consents, to implement 
                                    the Acquisition by way of the Takeover 
                                    Offer, the date on which the Takeover 
                                    Offer becomes or is declared unconditional 
                                    in all respects 
 Effective Time                    the time at which the Scheme becomes 
                                    effective in accordance with its terms 
 Euroclear                         Euroclear UK and Ireland Limited 
 Ex--Dividend Closing Price        the Closing Price of a Vectura Share 
                                    on a particular trading day as derived 
                                    from Bloomberg, less 19 pence, being 
                                    the value of the Interim Dividend 
 FCA or Financial Conduct          the Financial Conduct Authority acting 
  Authority                         in its capacity as the competent authority 
                                    for the purposes of Part VI of the 
                                    UK Financial Services and Markets 
                                    Act 2000 
 FDA                               the US Food and Drug Administration 
 Forms of Proxy                    the forms of proxy in connection with 
                                    each of the Court Meeting and the 
                                    General Meeting, which shall accompany 
                                    the Scheme Document 
 General Meeting                   the general meeting of Vectura Shareholders 
                                    (including any adjournment thereof) 
                                    to be convened in connection with 
                                    the Scheme 
 German Foreign Investment         has the meaning given to it in paragraph 
  Condition                         3(d) of Part A of Appendix I to this 
                                    announcement 
 Interim Dividend                  the interim dividend of 19 pence for 
                                    each Vectura Share paid on 11 June 
                                    2021 
 J.P. Morgan Cazenove              J.P. Morgan Securities plc, which 
                                    conducts its UK investment banking 
                                    business as J.P. Morgan Cazenove 
 Listing Rules                     the rules and regulations made by 
                                    the Financial Conduct Authority under 
                                    the Financial Services and Markets 
                                    Act 2000 (as amended), and contained 
                                    in the publication of the same name, 
                                    as amended from time to time 
 London Stock Exchange             London Stock Exchange plc 
 Long Stop Date                    11.59 p.m. on 31 December 2021 or 
                                    such later date as may be agreed in 
                                    writing by PMI Bidder and Vectura 
                                    (with the Panel's consent and as the 
                                    Court may approve (if such consent

                                    or approval is required)) 
 Murano                            Murano Bidco Limited, a newly formed 
                                    company indirectly controlled by funds 
                                    managed by Carlyle Europe Partners 
                                    V, with registered number 13412569 
 Offer Period                      the offer period (as defined by the 
                                    Takeover Code) relating to Vectura, 
                                    which commenced on 26 May 2021 
 Official List                     the Official List of the London Stock 
                                    Exchange 
 Opening Position Disclosure       has the same meaning as in Rule 8 
                                    of the Takeover Code 
 Overseas Shareholders             Vectura Shareholders (or nominees 
                                    of, or custodians or trustees for 
                                    Vectura Shareholders) not resident 
                                    in, or nationals or citizens of, the 
                                    United Kingdom 
 Panel                             the Panel on Takeovers and Mergers 
 PMI                               Philip Morris International Inc. 
 PMI Bidder                        PMI Global Services Inc. 
 PMI Group                         PMI and its direct and indirect subsidiary 
                                    undertakings including, following 
                                    the Acquisition becoming Effective, 
                                    the Vectura Group 
 PRA                               the UK Prudential Regulation Authority 
 Register                          the register of members of the Company 
 Registrar of Companies            the Registrar of Companies in England 
                                    and Wales 
 Regulations                       the Uncertificated Securities Regulations 
                                    2001 (SI2001 No. 3755), as amended 
                                    from time to time 
 Regulatory Conditions             the Conditions set out in paragraphs 
                                    3(a) to 3(d) and 3(e) of Part A of 
                                    Appendix I to this announcement 
 Regulatory Information            any of the services set out in Appendix 
  Service                           I to the Listing Rules 
 Relevant Authority                any central bank, ministry, governmental, 
                                    quasi--governmental, supranational 
                                    (including the European Union), statutory, 
                                    regulatory, environmental, administrative, 
                                    fiscal or investigative body, authority 
                                    or tribunal (including any national 
                                    or supranational antitrust, competition 
                                    or merger control authority, any sectoral 
                                    ministry or regulator, any court and 
                                    any foreign investment review body), 
                                    national, state, municipal or local 
                                    government (including any subdivision, 
                                    court, tribunal, administrative agency 
                                    or commission or other authority thereof), 
                                    any entity owned or controlled by 
                                    them, any private body exercising 
                                    any regulatory, taxing, importing 
                                    or other authority, trade agency, 
                                    association, institution or professional 
                                    or employee representative body in 
                                    any jurisdiction, including, for the 
                                    avoidance of doubt, the Panel 
 Restricted Jurisdiction           any jurisdiction where local laws 
                                    or regulations may result in a significant 
                                    risk of civil, regulatory or criminal 
                                    exposure or other formality which 
                                    Vectura or PMI Bidder regards as unduly 
                                    onerous if information concerning 
                                    the Acquisition is sent or made available 
                                    to Vectura Shareholders 
 Rothschild & Co                   N.M. Rothschild & Sons Limited 
 Scheme or Scheme of Arrangement   the proposed scheme of arrangement 
                                    under Part 26 of the Companies Act 
                                    between Vectura and the Scheme Shareholders 
                                    in connection with the Acquisition, 
                                    with or subject to any modification, 
                                    addition or condition approved or 
                                    imposed by the Court and agreed by 
                                    Vectura and PMI Bidder 
 Scheme Document                   the document to be sent to Vectura 
                                    Shareholders containing, amongst other 
                                    things, the Scheme and the notices 
                                    convening the Court Meeting and the 
                                    General Meeting 
 Scheme Record Time                the time and date specified as such 
                                    in the Scheme Document 
 Scheme Shareholders               holders of Scheme Shares 
 Scheme Shares                     the Vectura Shares: 
                                    (i) in issue at the date of the Scheme 
                                    Document and which remain in issue 
                                    at the Scheme Record Time; 
                                    (ii) (if any) issued after the date 
                                    of the Scheme Document but before 
                                    the Voting Record Time and which remain 
                                    in issue at the Scheme Record Time; 
                                    and 
                                    (iii) (if any) issued at or after 
                                    the Voting Record Time but before 
                                    the Scheme Record Time on terms that 
                                    the holder thereof shall be bound 
                                    by the Scheme or in respect of which 
                                    the original or any subsequent holders 
                                    thereof are, or have agreed in writing 
                                    to be, bound by the Scheme and, in 
                                    each case, which remain in issue at 
                                    the Scheme Record Time 
                                    excluding, in any case, any Vectura 
                                    Shares held by or on behalf of PMI 
                                    Bidder or any member of the PMI Group 
                                    or held by Vectura in treasury 
 Significant Interest              in relation to an undertaking, a direct 
                                    or indirect interest of 20 per cent. 
                                    or more of the total voting rights 
                                    conferred by the equity share capital 
                                    (as defined in section 548 of the 
                                    Companies Act) of such undertaking 
 Statement of Purpose              the Statement of Purpose adopted by 
                                    PMI's board of directors and issued 
                                    in its proxy statement of 26 March 
                                    2020 
 Takeover Code                     the City Code on Takeovers and Mergers 
 Takeover Offer                    should the Acquisition be implemented 
                                    by way of a takeover offer as defined 
                                    in Chapter 3 of Part 28 of the Companies 
                                    Act, the offer to be made by or on 
                                    behalf of PMI Bidder to acquire the 
                                    entire issued and to be issued ordinary 
                                    share capital of Vectura not then 
                                    held by PMI Bidder and, where the 
                                    context admits, any subsequent revision, 
                                    variation, extension or renewal of 
                                    such takeover offer 
 UK or United Kingdom              has the meaning given to it in paragraph 
                                    3(c) of Part A of Appendix I to this 
                                    announcement 
 UK National Security and          has the meaning given to it in paragraph 
  Investment Condition              3(c) of Part A of Appendix I to this 
                                    announcement 
 United States or US               the United States of America, its 
                                    territories and possessions, any state 
                                    of the United States of America, the 
                                    District of Columbia and all other 
                                    areas subject to its jurisdiction 
                                    and any political sub--division thereof 
 US Exchange Act                   the United States Securities Exchange 
                                    Act 934, as amended 
 Vectura or Company                Vectura Group plc 
 Vectura Directors                 the directors of Vectura at the time

                                    of this announcement or, where the 
                                    context so requires, the directors 
                                    of Vectura from time to time 
 Vectura Group                     Vectura and its subsidiary undertakings 
                                    and, where the context permits, each 
                                    of them 
 Vectura Preference Shares         the existing unconditionally allotted 
                                    or issued and fully paid redeemable 
                                    preference shares of Vectura with 
                                    a nominal value of GBP1.00 each 
 Vectura Shareholders or           the holders of Vectura Shares 
  Shareholders 
 Vectura Shares                    the existing unconditionally allotted 
                                    or issued and fully paid ordinary 
                                    shares of 0.0271 pence each in the 
                                    capital of Vectura and any further 
                                    such ordinary shares which are unconditionally 
                                    allotted or issued before the Scheme 
                                    becomes effective 
 Vectura Share Plans               the Vectura Approved Share Option 
                                    Plan, the Vectura Unapproved Share 
                                    Option Plan, the 2012 Vectura Long--Term 
                                    Incentive Plan, the 2015 Vectura Long--Term 
                                    Incentive Plan, the Vectura Deferred 
                                    Share Bonus Plan, the Vectura Sharesave 
                                    (SAYE) scheme and the Vectura Share 
                                    Incentive Plan (SIP), the Vectura 
                                    Global Share Incentive Plan, the SkyePharma 
                                    Share Incentive Plan and the SkyePharma 
                                    International Share Plan 
 Voting Record Time                the time and date specified in the 
                                    Scheme Document by reference to which 
                                    entitlement to vote at the Court Meeting 
                                    will be determined 
 Wider PMI Group                   PMI and each of its subsidiary undertakings 
                                    and associated undertakings and any 
                                    other undertaking, body corporate, 
                                    partnership, joint venture or person 
                                    in which PMI and such undertakings 
                                    (aggregating their interests) have 
                                    a Significant Interest and 
 Wider Vectura Group               Vectura and associated undertakings 
                                    and any other undertaking, body corporate, 
                                    partnership, joint venture or person 
                                    in which Vectura and such undertakings 
                                    (aggregating their interests) have 
                                    a Significant Interest

For the purposes of this announcement, "subsidiary", "subsidiary undertaking", "undertaking" and "associated undertaking" have the respective meanings given thereto by the Companies Act.

All references to "pounds", "pounds Sterling", "Sterling", "GBP", "pence", "penny" and "p" are to the lawful currency of the United Kingdom.

All references to "US$", "USD", "$" and "US Dollars" are to the lawful currency of the United States.

All the times referred to in this announcement are London times unless otherwise stated.

References to the singular include the plural and vice versa.

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END

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July 09, 2021 02:00 ET (06:00 GMT)

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