JLL Partners and Royal DSM to create new pharma firm in a $2.6 bn deal

New York-based private-equity firm JLL Partners Inc today struck a deal to acquire a majority stake in Dutch vitamin-maker Royal DSM NV (DSM)'s pharmaceuticals business and create a new pharma company, in a deal valued at $2.6 billion.

Under the deal, both DSM and JLL will form a new company  (provisionally called NewCo), where JLL will hold 51 per cent and DSM the remaining 49 per cent.

DSM's Pharmaceutical Products business will be merged with Canadian provider of commercial manufacturing outsourcing services Patheon Inc, in which JLL holds a 55.7 per cent stake.

JLL will contribute $489 million in cash to NewCo, while DSM will contribute its DPP unit and receive a seller note of $200 million, thereby valuing the assets at $670 million.

NewCo has entered into an agreement with Patheon, under which NewCo would acquire Patheon for $9.32 per share in cash, valuing Patheon at approximately $1.95 billion, a 64 per cent premium to Patheon's closing share price on 18 November.

JLL and the executive officers and directors of Patheon, who collectively own approximately 66 per cent in Patheon, have agreed to support the deal.

JLL has received committed financing of $1.65 billion for the deal from JP Morgan, UBS, Jefferies, Morgan Stanley and KeyBank.

NewCo will be a leading global contract development and manufacturing company with anticipated 2014 sales of about $2 billion.

DSM said that 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 maximise 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 partnership,'' DSM said in a statement.

Patheon is a leading provider of contract development and commercial manufacturing services to the global pharmaceutical industry, with a focus on drug products and has around 5,900 employees.

In the 12 months ending 31 July 2013, the company recorded revenues of $943 million.

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 realised net sales of €543 million and has around 2,400 employees.

DSM, the world's largest vitamin maker, employs around 22,000 people globally and manufactures products as diverse as nutritional supplements (including a new way of fortifying sugar with Vitamin A), to pharmaceuticals, electronics and the paint industry.