Global CDMO company combines DSM Pharmaceutical Products and
Patheon
JLL Partners (“JLL”), a leading middle-market private equity
firm, and Royal DSM, the global Life Sciences and Materials
Sciences company, today announced the creation of a new company,
which will be a leading global contract development and
manufacturing organization (CDMO) for the pharmaceutical industry
with anticipated sales of around USD 2 billion. It will be 51%
owned by JLL and 49% by DSM.
The name of the company (provisionally called NewCo) will be
announced in the coming months. NewCo will be formed by combining
DSM’s business group DSM Pharmaceutical Products (“DPP”) with
Patheon Inc. (TSX: PTI) (“Patheon”), after a successful completion
of the transaction described below. NewCo will be a leading global
contract development and manufacturing organization with
anticipated 2014 sales of about USD 2 billion (pro-forma) and a
strong EBITDA and operational cash flow.
NewCo will have an end-to-end offering from finished dosage
(drug products) to active substances (APIs) and a global footprint
of 23 locations across North America, Europe, Latin America and
Australia with about 8,300 employees.
Combining DPP and Patheon is fully in line with DSM’s strategy
for its Pharma cluster as well as an excellent value creation
opportunity as DSM and JLL will work together to maximize the value
of NewCo. For DSM, combining DPP with Patheon into NewCo is also a
key step in the strategic transformation of its Pharma activities
into partnerships.
Once the transaction is complete, NewCo will add scale and new
value chain capabilities/technologies to expand its end-to-end
service offering as a comprehensive solution provider to the
industry. NewCo will operate as an independent standalone
company.
The highlights of the transaction are as follows:
- NewCo will be owned by JLL (51%) and
DSM (49%).
- JLL will contribute USD 489 million in
cash to NewCo and DSM will contribute DSM Pharmaceutical Products
(DPP) and receive a seller note of USD 200 million, thereby valuing
DPP at USD 670 million.
- NewCo has entered into a definitive
agreement to effect a Plan of Arrangement pursuant to the Canada
Business Corporations Act (“POA”) with Patheon under which NewCo
would acquire Patheon for USD 9.32 per share in cash resulting in
a:
- total enterprise value for Patheon of
approximately USD 1.95 billion (about €1.45 billion)
- 64% premium to Patheon’s closing share
price on 18 November, 2013
- Patheon’s Board of Directors, acting on
the unanimous recommendation of a committee of independent
directors, recommends that Patheon’ shareholders vote in favor of
the POA.
- JLL and the executive officers and
directors of Patheon, who collectively own approximately 66% of the
outstanding shares of Patheon, have signed Voting Agreements in
support of the POA.
- Committed financing to be funded at
closing of USD 1.65 billion has been secured from J.P. Morgan, UBS,
Jefferies, Morgan Stanley and KeyBank.
- Subject to customary conditions, the
transaction is expected to close in H1 2014.
- DSM will deconsolidate DPP after
closing.
- The transaction is expected to be EPS
accretive for DSM from 2015 onwards.
Patheon is a leading provider of contract development and
commercial manufacturing services to the global pharmaceutical
industry, with a focus on drug products. In the 12 months ending 31
July 2013, the company recorded revenues of USD 943 million and
pro-forma consolidated EBITDA (per credit agreement definition) of
USD 188 million. The company has around 5,900 employees.
DPP is a leading provider of contract development and
manufacturing services to the pharmaceutical, biopharmaceutical and
agrochemical industries with a focus on drug products and APIs. In
2012 DPP realized net sales of €543 million with around 2,400
employees.
NewCo will have a unique breadth of service offerings
with a focus on drug products and APIs with a wide range of
technologies and will be able to offer comprehensive end-to-end
solutions to a broad spectrum of companies ranging from large
pharmaceutical and biotech companies to specialty pharma companies,
generics and emerging pharma companies.
The combined company will also be a leader in proprietary
softgel formulations for over-the-counter, prescription and
nutritional consumer products. The exclusive synthesis products and
intermediates are targeted to the crop protection, personal care,
and fine chemicals products industries.
Jim Mullen, currently CEO of Patheon, will be appointed CEO of
NewCo upon completion of the transaction. Mr. Mullen joined Patheon
in 2011 as Chief Executive Officer. Prior to joining Patheon, he
served as CEO and President at Biogen Idec Inc., one of the world's
largest biotechnology companies from 2003 to 2010. He possesses
over 30 years of industry experience, ranging from biotechnology
and pharmaceuticals to specialty chemicals, as well as extensive
expertise in pharmaceutical and biotech manufacturing, engineering,
sales, marketing, mergers and acquisitions.
Feike Sijbesma, CEO and Chairman of the DSM Managing Board,
said: “Fully in line with our strategy, this is for DSM
Pharmaceutical Products the perfect way to accelerate growth and
for DSM to maximize value for this business. By creating a global
top CDMO organization I am convinced that NewCo as a standalone
company will be able to create substantial value. With this
partnership DSM has made a key step in the strategic transformation
of its Pharma activities into partnerships whilst creating maximal
value for all stakeholders.“
Paul S. Levy, Managing Director of JLL Partners, Chairman of the
Board of Patheon shared: “This partnership demonstrates JLL’s
commitment to building companies that create value, fill unmet
needs and drive excellence within their respective industries. This
is the strategic initiative and execution ‘know how’ that
stakeholders have come to expect from JLL. NewCo is poised to
transform the CDMO industry and we are excited to bring these two
entities together.”
Stefan Doboczky, Member of the DSM Managing Board and
responsible for the Pharma cluster, commented: “Our customers bring
life-saving and life-enhancing medicines to people who need them
around the world. They will greatly benefit from NewCo’s unmatched
depth and breadth of capabilities and services. I am convinced that
NewCo will be even better positioned to help customers succeed with
their unique needs.”
Financial information
DSM expects the transaction to be accretive to its earnings per
share from 2015 onwards. In accordance with the applicable
accounting standards DPP will be classified as assets held for sale
in Q4 2013 and a non-cash impairment loss of around €120 million
will be recognized as an exceptional item. From the closing date
onwards DSM will present the investment in NewCo as an associated
account in accordance with the equity method. Under IFRS rules also
DSM Sinochem Pharmaceuticals will be deconsolidated from 1 January
2014. Consequently, the reporting of the Pharma cluster in the core
EBITDA of DSM will be discontinued from the beginning of 2014.
Additional information
J.P. Morgan Limited is serving as financial advisor to DSM.
Latham & Watkins LLP is serving as lead legal advisor to DSM,
supported by Cleary Gottlieb Steen & Hamilton LLP, Norton Rose
Fulbright Canada LLP, Allen & Overy and Hinckley, Allen &
Snyder LLP. Morgan Stanley and Jefferies are serving as financial
advisors to JLL Partners. Legal advisors to JLL Partners are
Skadden, Arps, Slate, Meagher & Flom LLP, Borden Ladner Gervais
LLP and Simpson Thacher & Bartlett LLP.
Conference calls
Today DSM will hold a conference call for the media from 08.00
AM – 08.30 AM CET (+31 (0)20 53 15 871 or +44 (0) 203 365 3207) and
a conference call for investors and analysts from 09.00 AM – 10.00
AM CET (+31 (0)20 53 15 871 or +44 (0) 203 365 3207). Also, more
information can be found in the presentation that can be found on
www.dsm.com.
JLL Partners
JLL Partners is a middle-market private equity firm with a 25
year track-record of adding value to complex investments through
financial and operational expertise. Since its founding in 1988 by
Paul S. Levy, JLL Partners has committed approximately USD 4.2
billion across six funds, and developed significant expertise in
the healthcare and other sectors. JLL is a control investor and
sources its deals from its deep network of industry contacts,
applying its proven, value-oriented and growth driven investment
approach to provide limited partners with attractive risk-adjusted
returns throughout all investment cycles.
Patheon
Patheon Inc. (TSX: PTI) is a leading provider of contract
development and commercial manufacturing services to the global
pharmaceutical industry for a full array of solid and sterile
dosage forms. Through the company’s recent acquisition of Banner
Pharmacaps – a market leader in soft gelatin capsule technology –
Patheon now also includes a proprietary products and technology
business. Patheon provides the highest quality products and
services to approximately 300 of the world's leading pharmaceutical
and biotechnology companies. The company's integrated network
consists of 13 locations, including commercial contract
manufacturing facilities and development centers across North
America and Europe. Patheon enables customer products to be
launched with confidence anywhere in the world. For more
information visit http://www.patheon.com.
Patheon plans to file with the U.S. Securities and Exchange
Commission (the “SEC”) and furnish to its shareholders a proxy
statement and management information circular in connection with
the proposed transaction with NewCo. The proxy statement and
management information circular will also be filed on SEDAR.
INVESTORS AND SECURITYHOLDERS OF PATHEON ARE URGED TO READ THE
PROXY STATEMENT AND MANAGEMENT INFORMATION CIRCULAR AND THE OTHER
RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE SUCH
MATERIALS WILL CONTAIN IMPORTANT INFORMATION ABOUT PATHEON, NEWCO
AND THE PROPOSED TRANSACTION. The proxy statement and management
information circular and other relevant materials (when they become
available), and any and all other documents filed by Patheon with
the U.S. or Canadian securities regulators, may be obtained free of
charge at the SEC’s website at www.sec.gov or in Canada at
www.sedar.com. In addition, investors and securityholders may
obtain free copies of the documents Patheon files with the SEC or
with Canadian securities regulators by directing a written request
to Patheon Inc., 2100 Syntex Court, Missisauga, Ontario, Canada L5N
7K9, Attention: Corporate Secretary. Copies of Patheon’s filings
with the SEC and with Canadian securities regulators may also be
obtained at the “Investors Relations” section of Patheon’s website
at www.patheon.com.
DSM – Bright Science. Brighter Living.™
Royal DSM is a global science-based company active in health,
nutrition and materials. By connecting its unique competences in
Life Sciences and Materials Sciences DSM is driving economic
prosperity, environmental progress and social advances to create
sustainable value for all stakeholders. DSM delivers innovative
solutions that nourish, protect and improve performance in global
markets such as food and dietary supplements, personal care, feed,
pharmaceuticals, medical devices, automotive, paints, electrical
and electronics, life protection, alternative energy and bio-based
materials. DSM’s 23,500 employees deliver annual net sales of
around €9 billion. The company is listed on NYSE Euronext. More
information can be found www.dsm.com.
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DSM Forward-looking statements
This press release may contain forward-looking statements with
respect to DSM’s future (financial) performance and position. Such
statements are based on current expectations, estimates and
projections of DSM and information currently available to the
company. DSM cautions readers that such statements involve certain
risks and uncertainties that are difficult to predict and therefore
it should be understood that many factors can cause actual
performance and position to differ materially from these
statements. DSM has no obligation to update the statements
contained in this press release, unless required by law. The
English language version of the press release is leading.
Patheon Forward-looking statements:
This press release contains “forward looking information” or
"forward-looking statements" within the meaning of applicable
Canadian securities laws, including statements regarding the
proposed transaction, the combined company’s plans, objectives,
expectations and intentions, leadership in the contract development
and manufacturing services industry, the expected sales of the
combined company, expected timing and benefits of the transaction,
and the preparation, delivery and availability of a proxy statement
and management information circular and other relevant materials in
connection with the proposed transaction, , which forward-looking
statements may use forward-looking terminology such as "may",
"will", "expect", "anticipate", "believe", "continue", "potential",
or the negative thereof or other variations thereof or comparable
terminology. Such forward-looking statements may include, without
limitation, statements regarding the completion of the proposed
transaction and other statements that are not historical facts.
These forward-looking statements reflect beliefs and assumptions
which are based on Patheon’s and Newco’s perception of historical
trends, current conditions and expected future developments, as
well as other factors management believes are appropriate in the
circumstances. In making these statements, Patheon and Newco have
made assumptions with respect to: the proposed financing of the
transaction; the ability of Patheon and Newco to achieve expected
synergies and the timing of same; the ability of Patheon and Newco
to predict and adapt to changing customer requirements, preferences
and spending patterns; the ability of Patheon and Newco to protect
their intellectual property; future capital expenditures, including
the amount and nature thereof; trends and developments in the
contract development and manufacturing services industry and other
sectors of the economy which are related to these sectors; business
strategy and outlook; expansion and growth of business and
operations; credit risks; anticipated acquisitions; future results
being similar to historical results; expectations related to future
general economic and market conditions; and other matters.
Patheon’s and Newco’s beliefs and assumptions are inherently
subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and as
such, are subject to change. Patheon’s beliefs and assumptions may
prove to be inaccurate and consequently Patheon's actual results
could differ materially from the expectations set out herein.
While such forward-looking statements are expressed by Patheon,
as stated in this release, in good faith and believed by Patheon to
have a reasonable basis, they are subject to important risks and
uncertainties including, without limitation, the possibility that
certain assumptions with respect to the proposed transaction could
prove to be inaccurate, risks and uncertainties relating to the
transaction and financing thereof, Newco’s significant levels of
indebtedness as a result of the proposed transaction, Newco’s
inability to complete the anticipated financing as contemplated by
applicable commitment letters prior to the contractually required
time for closing of the proposed transaction or otherwise secure
favourable terms for such financing, approval of applicable
governmental authorities, required Patheon shareholder approval and
necessary court approvals, the satisfaction or waiver of certain
other conditions contemplated by the Arrangement Agreement,
disruptions resulting from the proposed transaction making it more
difficult to maintain business relationships, and changes in
applicable laws or regulations, which could cause actual results to
differ materially from future results expressed, projected or
implied by the forward-looking statements. As a result of these
risks and uncertainties, the proposed transaction could be
modified, restructured or may not be completed, and the results or
events predicted in these forward-looking statements may differ
materially from actual results or events. These forward-looking
statements are not guarantees of future performance, given that
they involve risks and uncertainties. Patheon is not affirming or
adopting any statements made by any other person in respect of the
proposed transaction and expressly disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except in accordance with applicable securities laws or to comment
on expectations of, or statements made by any other person in
respect of the proposed transaction.
Investors should not assume that any lack of update to a
previously issued forward-looking statement constitutes a
reaffirmation of that statement. Reliance on forward-looking
statements is at an investors' own risk.
Cautionary Statement
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein.
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DSM Corporate CommunicationsHerman Betten, +31 (0) 45
5782017media.relations@dsm.comorDSM Investor RelationsDave Huizing,
+31 (0) 45 5782864investor.relations@dsm.comorJLL PartnersDan
Agroskin, +1 212-210-9369d.agroskin@jllpartners.comorPatheon Inc.+1
919-226-3200media@patheon.com