JLL Partners, Royal DSM create $2.6bn pharma business

The newco (provisionally named NewCo) will comprise JLL portfolio company Patheon, a US provider of commercial manufacturing services to the pharmaceutical industry, and DSM Pharmaceutical Products (DPP), the contract manufacturing subsidiary of NYSE Euronext-listed DSM.

The domicile of NewCo has yet to be decided, according to DSM spokesman Herman Betten. JLL will hold a 51% stake in the entity, with DSM owning the remainder of the shares.

JLL will make a $489m cash injection into NewCo as part of the merger, and a further $200m will be supplied in the form of a seller note to DSM for its contribution of DPP to NewCo.

Patheon, currently listed on the Toronto Stock Exchange, will be purchased and delisted by NewCo for a price of $9.32 per share, resulting in an enterprise value of approximately $1.95bn (€1.45bn) for the business. The price-per-share represents a 64% premium on Patheon's closing price on 18 November.

Through a private placement, JLL purchased $150m of convertible preferred shares in Patheon in April 2007.

NewCo has secured a debt package totalling $1.65bn for the transaction, which will be provided by JP Morgan, UBS, Jefferies, Morgan Stanley and KeyBank upon completion of the deal.

The transaction is expected to be completed within the first half of 2014. JP Morgan is acting as financial adviser to DSM, while Latham & Watkins has been appointed as lead legal adviser to the Dutch group.

Morgan Stanley and Jefferies have been appointed as financial advisers to JLL. The private equity firm's legal advisers for the transaction are Skadden Arps Slate Meagher & Flom, Borden Ladner Gervais and Simpson Thacher & Bartlett.

NewCo will have expected pro-forma sales of $2bn in 2014. The new entity will employ approximately 8,300 staff and will have bases in 23 locations across Europe, Australia and the Americas.

The company will focus its custom manufacturing and development services on drug products and active pharmaceutical ingredients (APIs) for crop protection and fine chemicals. NewCo will also specialise in the manufacturing of softgel products for over-the-counter, prescription and nutritional consumer products.

DPP's current parent company, DSM, is headquartered in Heerlen in the Netherlands. The group employs 23,500 staff and generated net sales of €9.13bn in 2012, as well as an EBITDA of €1.1bn.

The group's DPP subsidiary has a workforce totalling 2,400 and generated net sales of €543m in 2012. DPP falls under the pharmaceutical division of DSM's operational structure and is split into five units: Pharma Chemicals, Exclusive Synthesis, Biologics, Pharmaceuticals and BioSolutions.

DPP's five units focus on the biopharmaceutical and merchant pharmaceutical fine chemicals industries. As a collective, the subsidiary provides custom chemical and API manufacturing services for crop protection, finished-dose-form products and microbial fermentation.

North Carolina-headquartered Patheon was established as Custom Pharmaceuticals in 1974 and changed its name in 1993. The company employs around 6,000 staff and recorded turnover of $943m in the 12 month to July 2013, as well as an EBITDA of $188m.

Patheon CEO Jim Mullen is to become CEO of NewCo. Stefan Doboczky is a member of DSM's management board and oversees the group's pharmaceutical division. Paul Levy is a managing director at JLL and chairman of Patheon's board of directors.

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• Topics
• Benelux
• Healthcare
• Buyouts
• Netherlands
• United States