Gil Roth11.19.13
In one of the largest transactions in the history of the pharma CDMO space, JLL Partners will take Patheon private and merge it with DSM Pharmaceutical Products (DPP). The total transaction cost will be nearly $2.6 billion and will result in a new company ("NewCo") with approximately $2.0 billion in pro forma annual revenues. JLL will own 51% of NewCo and Royal DSM will own 49%.
JLL will put $489 million into NewCo and Royal DSM will receive a seller note of $200 million for DPP, valuing DPP at $670 million. NewCo will take Patheon private at an enterprise valuation of approximately $2.0 billion (equity valuation: $1.4 billion), representing a 64% premium to Patheon's closing share price from the previous day. Patheon's board recommended the buyout unanimously, and shareholders representing 66% of Patheon's outstanding shares have signed voting agreements in support of the move. The deal is expected to close in 1H14.
The combined company will have 8,300 employees and 23 facilities worldwide. There was no immediate word on expected synergies or layoffs. The new company will have strengths in dosage form manufacturing, development services, capsules and APIs. Patheon chief executive officer Jim Mullen will lead NewCo, but other executive-level appointments were not announced.
Commenting on the transaction, Jim Miller, president of PharmSource Information Services, told Contract Pharma, "The Patheon-DSM deal is just the latest instance of the consolidation trend we have seen in the CMO industry in recent years. The deal gets Patheon the North American injectables facility it has so badly wanted and needed. The challenge for NewCo will be what to do with the small molecule API and intermediates business, which has been a drag on DPP's operating performance and faces significant issues with its markets and facilities.” In recent years, Royal DSM cited DPP as a drag on its results; the move enables the company to remove DPP from its financial reports.
One CMO told us that the move is a necessary consolidation in a very fragmented industry with too many players and fixed number of opportunities. "As consolidation of vendor bases within global bio/pharma continues, as it has in the CRO space, more mergers are likely to occur in order to leverage larger partnership opportunities with clients," said the CMO source.
A chemical/API analyst told Contract Phama, "DSM wants to slim down. They may also want to sell the industrial chemical business, which will make them mainly a pure play in nutrition and high performance materials. This is more or less what will be remaining. It's a brilliant move from the perspective of DPP. Of late, that group has consistently underperformed in dosage form and synthesis. The question is, will the combination of companies work in the long term? Can you manage all of these portfolios and still be responsive? It'll be interesting times." The analyst also noted that we should wait until the deal closes for announcements of cost-cutting. "Down the line, I imagine, the ownership will spin it off, perhaps by floating an IPO."
Debt financing of $1.65 billion was committed by J.P. Morgan, UBS, Jefferies, Morgan Stanley and KeyBank.
Look for our Newsmakers Q&A with Patheon CEO Jim Mullen in the January/February issue of Contract Pharma!
JLL will put $489 million into NewCo and Royal DSM will receive a seller note of $200 million for DPP, valuing DPP at $670 million. NewCo will take Patheon private at an enterprise valuation of approximately $2.0 billion (equity valuation: $1.4 billion), representing a 64% premium to Patheon's closing share price from the previous day. Patheon's board recommended the buyout unanimously, and shareholders representing 66% of Patheon's outstanding shares have signed voting agreements in support of the move. The deal is expected to close in 1H14.
The combined company will have 8,300 employees and 23 facilities worldwide. There was no immediate word on expected synergies or layoffs. The new company will have strengths in dosage form manufacturing, development services, capsules and APIs. Patheon chief executive officer Jim Mullen will lead NewCo, but other executive-level appointments were not announced.
Commenting on the transaction, Jim Miller, president of PharmSource Information Services, told Contract Pharma, "The Patheon-DSM deal is just the latest instance of the consolidation trend we have seen in the CMO industry in recent years. The deal gets Patheon the North American injectables facility it has so badly wanted and needed. The challenge for NewCo will be what to do with the small molecule API and intermediates business, which has been a drag on DPP's operating performance and faces significant issues with its markets and facilities.” In recent years, Royal DSM cited DPP as a drag on its results; the move enables the company to remove DPP from its financial reports.
One CMO told us that the move is a necessary consolidation in a very fragmented industry with too many players and fixed number of opportunities. "As consolidation of vendor bases within global bio/pharma continues, as it has in the CRO space, more mergers are likely to occur in order to leverage larger partnership opportunities with clients," said the CMO source.
A chemical/API analyst told Contract Phama, "DSM wants to slim down. They may also want to sell the industrial chemical business, which will make them mainly a pure play in nutrition and high performance materials. This is more or less what will be remaining. It's a brilliant move from the perspective of DPP. Of late, that group has consistently underperformed in dosage form and synthesis. The question is, will the combination of companies work in the long term? Can you manage all of these portfolios and still be responsive? It'll be interesting times." The analyst also noted that we should wait until the deal closes for announcements of cost-cutting. "Down the line, I imagine, the ownership will spin it off, perhaps by floating an IPO."
Debt financing of $1.65 billion was committed by J.P. Morgan, UBS, Jefferies, Morgan Stanley and KeyBank.
Look for our Newsmakers Q&A with Patheon CEO Jim Mullen in the January/February issue of Contract Pharma!