, Nov. 19, 2013
/PRNewswire/ - Patheon Inc. (TSX:PTI) ("Patheon") today
announced that it has entered into an arrangement agreement (the
"Arrangement Agreement") with JLL/Delta Patheon Holdings, L.P.,
a limited partnership ("Newco") under which Patheon would be taken
private pursuant to a court-approved plan of arrangement (the
"Arrangement") under the Canada Business Corporations Act
. Newco is sponsored by an entity controlled by JLL Partners, Inc.
("JLL") and Koninklijke DSM N.V. ("DSM"). Affiliates of JLL currently
own 55.7% of the restricted voting shares of Patheon and all of the
outstanding class I preferred shares, series D of Patheon (the
The Arrangement Agreement contemplates that Newco will acquire, directly
or indirectly, all of the restricted voting shares of Patheon (the
"Restricted Voting Shares"), including those held by affiliates of JLL,
for cash consideration of US$9.32 per share (the "Cash
Consideration"). In addition, all of the Preferred Shares will be
purchased for nominal consideration and cancelled. The Cash
Consideration will be paid in US dollars at closing, and is equivalent
to approximately C$9.72 per share (based on the daily noon exchange
rate of the Bank of Canada on November 18, 2013). This represents a
64% premium to the closing price of the Restricted Voting Shares on
November 18, 2013, a premium of 73% to the volume weighted average
trading price of the Restricted Voting Shares on the TSX over the past
20 trading days, and a premium of 43% to the 52-week high (of C$6.80)
of the Restricted Voting Shares on the TSX. The transaction provides
total consideration to shareholders other than JLL affiliates of
approximately US$582 million and implies an equity value for Patheon of
approximately US$1.4 billion.
As part of the transaction, the limited partners of the JLL-affiliated
investment fund that indirectly owns 55.7% of the Restricted Voting
Shares will also receive the same Cash Consideration per Restricted
Voting Share as is provided to the minority shareholders of Patheon.
The transaction will result in Cash Consideration to all JLL affiliates
of approximately US$732 million. As part of the transaction, the
general and limited partners of such investment fund will make indirect
investments in Newco of approximately US$60 million and US$50 million,
in aggregate, respectively.
On the closing of the transaction, the business of Patheon and DSM's
existing pharmaceutical products business will be combined to create a
global leader in contract development and manufacturing services. The
combined entity will be a company with anticipated 2014 annual sales of
approximately US$2 billion (pro forma). Following completion of the
transaction, Patheon's Restricted Voting Shares will be de-listed from
the TSX and no longer traded publicly.
The transaction has been approved unanimously by the Board of Directors
of Patheon (with interested directors abstaining) following the report
and unanimous favourable recommendation of a special committee of
independent directors (the "Independent Committee"). In so doing, both
the Independent Committee and the Board of Directors of Patheon
determined that the Arrangement is fair to holders of Restricted Voting
Shares (other than affiliates of JLL and certain members of Patheon
management) (the "Minority Shares") and is in the best interests of
Patheon. Both the Independent Committee and the Board of Directors
recommend that minority shareholders vote in favour of the arrangement
resolution at the special meeting of holders of Restricted Voting
Shares to be held to approve the transaction (the "Special Meeting").
The Board of Directors of Patheon established the Independent Committee
- comprised of Derek Watchorn, Brian Shaw and David Sutin - to, among
other things, select an independent valuator, supervise the preparation
of a formal valuation of the Restricted Voting Shares, and negotiate
the terms of the Arrangement on behalf of Patheon. The Independent
Committee engaged BMO Capital Markets as independent valuator, and RBC
Capital Markets as financial advisor and was advised by Blake, Cassels
& Graydon LLP, as independent legal advisor.
Derek Watchorn, Chairman of the Independent Committee, stated "The
transaction delivers liquidity to our shareholders at a substantial
premium to the market price of Patheon's Restricted Voting Shares and
is supported by fairness opinions received from BMO Capital Markets and
RBC Capital Markets. We recommend that minority shareholders vote in
favour of the arrangement at the special meeting that will be called to
approve the transaction."
BMO Capital Markets has prepared a formal valuation of the Restricted
Voting Shares under the supervision of the Independent Committee as
contemplated by Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). BMO Capital Markets has rendered its oral opinion that,
subject to the assumptions, qualifications and limitations provided in
its opinion, the fair market value of the Restricted Voting Shares is
in the range of US$8.75 to US$10.25 per share as of November 18, 2013.
RBC Capital Markets and BMO Capital Markets have each provided an oral
opinion to the Independent Committee that the consideration to be
received under the Arrangement Agreement is fair, from a financial
point of view, to holders of Minority Shares.
The implementation of the Arrangement will be subject to shareholder
approval at the Special Meeting, which is expected to be held as early
as possible in calendar 2014. The transaction will constitute a
"business combination" for the purposes of MI 61-101, and the
implementation of the Arrangement will be subject to approval by a
majority of the votes cast at the Special Meeting by holders of
Minority Shares, in addition to approval by 66% of all votes cast at
the Special Meeting by holders of Restricted Voting Shares. The
transaction is also subject to approval by the Ontario Superior Court
of Justice, in addition to regulatory approvals and certain closing
conditions customary in transactions of this nature.
Certain affiliates of JLL and all of the directors and executive
officers of Patheon who hold Restricted Voting Shares have entered into
voting agreements pursuant to which, among other things, they have
agreed to vote their Restricted Voting Shares in favour of the
Arrangement. As a result, holders of approximately 66.08% of the
Restricted Voting Shares and 20.45% of the Minority Shares have agreed
to vote their shares in favour of the transaction.
The transaction will be financed through a combination of committed debt
and equity financing, subject to the terms of those commitments. The
debt financing of US$1.65 billion has been committed by J.P. Morgan,
UBS, Jefferies, Morgan Stanley and KeyBank. The equity financing
includes an aggregate contribution of US$489 million from entities
affiliated with JLL, certain co-investors and management, as well as
DSM's contribution of its existing pharmaceutical products business.
Patheon has also received from affiliates of JLL and DSM a limited
guarantee of certain obligations of Newco under the transaction.
The Arrangement Agreement provides for, among other things, a
non-solicitation covenant on the part of Patheon (subject to customary
fiduciary out provisions). The Arrangement Agreement also provides
Newco with a right to match potential third party proposals received by
Patheon. Patheon is permitted to terminate the Arrangement Agreement
in certain circumstances, including to allow Patheon to accept a
superior proposal subject to fulfilling certain conditions. Those
conditions include the payment to Newco of a termination fee of
US$23.64 million under certain circumstances.
In addition, Patheon is entitled to a termination fee from Newco in
certain circumstances. Such termination fee is either US$49.26 million
or US$24.63 million, depending on the circumstances of termination.
The terms and conditions of the proposed transaction will be disclosed
in more detail in a proxy statement and management information circular
that will be mailed to those holders of Restricted Voting Shares as of
the record date to be established. It is anticipated that the
transaction, if approved by Patheon shareholders and the Ontario
Superior Court of Justice, will be completed as early as possible in
Dentons Canada LLP, Goodwin Procter LLP, Gibson Dunn & Crutcher LLP, and
Hill Smith King & Wood LLP are acting as legal counsel to Patheon.
Skadden, Arps, Slate, Meagher & Flom LLP, Borden Ladner Gervais LLP and
Simpson Thacher & Bartlett LLP are acting as legal counsel to JLL and
its affiliates. Latham & Watkins LLP, Cleary Gottlieb Steen & Hamilton
LLP and Norton Rose Fulbright Canada LLP are acting as legal counsel to
Patheon has engaged Georgeson as its proxy solicitation agent.
Shareholders with questions should contact Georgeson in North America
toll free at 1-866-656-4121 or internationally by dialing 781-575-2182
Patheon confirms its previous revenue guidance issued on September 5,
2013 that Patheon revenues are expected to be in excess of US$1 billion
for fiscal 2013.
Patheon will host a conference call on Tuesday, November 19, 2013, at
8:30 a.m. Eastern Standard Time. Interested parties are invited to
access the conference call, via telephone, in listen-only mode, toll
free at 1-888-231-8191 (U.S., including Puerto Rico) and 1-647-427-7450
(Canada and international). Listeners are encouraged to dial in five to
15 minutes in advance to avoid delays.
A telephone replay of the conference call will be available between
Tuesday, November 19, 2013, and Tuesday, November 26, 2013, by dialing
1-855-859-2056 (toll-free) or 1-403-451-9481, and by entering
identification number 12653254, followed by the number key.
Additional Information About the Proposed Transaction
Copies of the Arrangement Agreement, the proxy statement and management
information circular for the Special Meeting (which will include the
valuation and the fairness opinions) and certain related documents will
be filed with Canadian and U.S. securities regulators and will be
available on the Canadian SEDAR profile of Patheon at www.sedar.com and the U.S. Securities and Exchange Commission's (the "SEC") website
(EDGAR) at www.sec.gov. In addition, investors and securityholders may obtain free copies of
the documents Patheon files with the SEC and with Canadian securities
regulators by directing a written request to Patheon Inc., 2100 Syntex
Court, Mississauga, 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 "Investor Relations"
section of Patheon's website at www.patheon.com.
Patheon plans to file with 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 security holders 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
Patheon and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the securityholders of
Patheon in connection with the proposed transaction. Information about
Patheon and its directors and executive officers, including their
ownership of Patheon securities, is set forth in the proxy statement
for Patheon's 2013 Annual and Special Meeting of Shareholders, which
was filed with the SEC on February 26, 2013, and on SEDAR in Canada on
February 27, 2013, as supplemented by other Patheon filings with the
SEC and Canadian securities regulators. Investors and securityholders
may obtain additional information regarding the direct and indirect
interests of Patheon and its directors and executive officers in the
proposed transaction by reading the proxy statement and management
information circular and other public filings referred to above when it
About Patheon Inc.
Patheon Inc. 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
18 locations, including 14 commercial contract manufacturing facilities
and 12 development centers across North America and Europe. Patheon
enables customer products to be launched with confidence anywhere in
the world. For more information visit www.patheon.com.
About JLL Partners
JLL Partners is a mid-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 $4.2 billion across six funds, and
developed significant expertise in the healthcare, financial services,
industrial, building products, education, aerospace and defense and
business services sectors. JLL is a control investor and sources its
deals from its deep network of industry contacts, applying its proven,
value-oriented investment approach to provide limited partners with
attractive risk-adjusted returns throughout all investment cycles.
About 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.
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 2014 pro forma annual sales of Newco,
expected timing and benefits of the transaction, the preparation,
delivery and availability of a proxy statement and management
information circular and other relevant materials in connection with
the proposed transaction, and the holding of a special meeting of
certain shareholders of Patheon in 2014, 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'
No stock exchange, securities commission or other regulatory authority
has approved or disapproved the information contained herein.
SOURCE Patheon Inc.