Thermo Fisher Scientific Bags Patheon in $7.2 Billion Deal, Pantheon Stock Soars

Published: May 17, 2017

Thermo Fisher Scientific Bags Patheon in $7.2 Billion Deal, Pantheon Stock Soars May 15, 2017
By Alex Keown, Breaking News Staff

WALTHAM, Mass. – Thermo Fisher Scientific Inc. snapped up North Carolina-based Patheon N.V. in a deal with $7.2 billion, which includes the assumption of $2 billion in net debt. This morning’s announcement sent Patheon stock soaring more than 22 percent.

Shares of Patheon are trading at $34.61. In its announcement this morning, Thermo Fisher said it would acquire all outstanding Patheon stock at $35.

Patheon, a provider of commercial manufacturing outsourcing services and outsourced pharmaceutical development services, operates 20 commercial-scale production facilities around the world. Patheon, which had revenues of about $1.6 billion in 2016, will become part of Thermo Fisher’s Laboratory Products and Services Segment. Mark Casper, president and chief executive officer of Thermo Fisher, said Patheon will complement the company’s offerings for the biopharma market. Having biologics development and manufacturing capabilities as well as bioproduction technologies in one company will allow Thermo Fisher to offer a more comprehensive portfolio to gain share with these customers.

“Our combined capabilities will enhance our unique value proposition for these customers, create significant value for our shareholders and further accelerate our company's growth,” Casper said in a statement.

Thermo Fisher said the acquisition of Patheon will provide the company with entry into the attractive and high growth contract development and manufacturing organization market. Patheon has invested significantly to become a scale player in the CDMO market and extend its leadership position. Last year Patheon acquired a 300,000 square-foot facility formerly owned by Roche in Florence, S.C. The new site will allow Patheon to expand its capacity for manufacturing highly potent compounds, and adds capabilities to support solid-state chemistry, micronization and eventually, commercial spray drying, the company said at the time of the acquisition.

"Over the past several years, we have increased our capabilities to become a leading CDMO provider in a highly fragmented market. We are confident that our combined offerings and Thermo Fisher's proven track record of disciplined M&A and successful integrations will take our business to the next level,” James Mullen, Patheon’s CEO said in a statement.

Additionally, Thermo Fisher said combining its own clinical trials logistics service capabilities with Patheon's CDMO services will allow Thermo Fisher to be a stronger partner for pharmaceutical and biotech customers.

Patheon has about 9,000 employees worldwide. Although Casper said in his statement that Thermo Fisher welcomed its new colleagues from Patheon, he did not indicate if any layoffs would occur due to redundancies.

The transaction is expected to close by the end of 2017. Thermo Fisher’s acquisition is backed by debt financing from Goldman Sachs. The company expects to finance the purchase price with debt of approximately $5.2 billion and equity of approximately $2 billion.

Thermo Fisher said the deal is expected to add 30 cents to the company’s adjusted profit in the first full year following the close of the deal. Thermo Fisher expects to realize total synergies of approximately $120 million by year three following the close.

Thermo Fisher has made several large M&A moves over the past year. In May 2016, the company plunked down $4.2 billion to acquire FEI Co. in order to gain access to that company’s electron microscopy technology. About a month prior, Thermo Fisher acquired gene sequencing firm Affymetrix for $1.3 billion. That deal provided Thermo Fisher with an expanded antibody portfolio and genetic analysis capabilities.

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