Private equity firm JLL Partners and Royal DSM, a life sciences and materials sciences company, have partnered to create a new contract development and manufacturing organization (CDMO) for the pharmaceutical industry.
The name of the company (temporarily called NewCo) will be announced in the coming months. NewCo will be formed by combining Royal DSM’s business group, DSM Pharmaceutical Products (DPP), with JLL’s portfolio company, Patheon. Annual sales for the NewCo are projected to be $2 billion. 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.
“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,” said Paul Levy, Managing Director of JLL Partners.
The highlights of the transaction are as follows:
- NewCo will be owned by JLL (51%) and DSM (49%).
- JLL will contribute $489 million in cash to NewCo and DSM will contribute DSM Pharmaceutical Products and receive a seller note of $200 million, thereby valuing DPP at $670 million.
- NewCo will acquire Patheon for $9.32 per share in cash resulting in a total enterprise value for Patheon of approximately $1.95 billion.
- Committed financing to be funded at closing of $1.65 billion has been secured from J.P. Morgan, UBS, Jefferies, Morgan Stanley and KeyBank.
- Jim Mullen, currently CEO of Patheon, will be appointed CEO of NewCo upon completion of the transaction.
- The transaction is expected to close in the first half of 2014.
Patheon is a provider of pharmaceutical development services and commercial contract manufacturing services to pharmaceutical and biotechnology companies. The company has a fully-integrated service offering, ranging from analytical development and pre-formulation to commercial manufacturing. In the 12 months ending July 31, 2013 the company had revenues of $943 million and EBITDA of $188 million. Patheon has over 5,900 employees across its network of facilities in the United States, Canada, Europe and Mexico. Patheon is a public company listed on the Toronto Stock Exchange under the symbol PTI. JLL Partners first invested in Pantheon in 2007 (www.patheon.com).
DSM Pharmaceutical Products (DPP) is a provider of contract development and manufacturing services to the pharmaceutical, biopharmaceutical and agrochemical industries with a focus on drug products and other active substances. In 2012, DPP had net sales of $734 million and had approximately 2,400 employees (www.dsm.com).
JLL Partners seeks to invest in companies across a range of manufacturing and service industries. Sectors of specific interest include healthcare services, medical products, food and consumer products, chemicals, broadcasting, transportation, automotive, industrial manufacturing, and distribution. JLL Partners is based in New York (www.jllpartners.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 11-19-13