Nov 21 (Buyouts Magazine) - JLL Partners co-founder Paul S.
Levy is expecting more acquisitions after the firm closed a $2.6
billion carve-out transaction to combine its Patheon Inc
portfolio company with Dutch-based DSM's pharmaceutical unit.
The deal drew $200 million in co-investments from the New
York firm's limited partners.
Levy told Buyouts the transaction resulted from talks
between the two companies' management teams, with no formal
auction process. The combined company will rank as the largest
in the pharmaceutical services business, he said.
The company will be named after the acquisition closes as
expected next year, he said. JLL will hold a 51 percent stake,
with DSM retaining 49 percent.
"The pharmaceutical manufacturing industry is highly
fragmented," Levy said. "We'd like to think we'll have some good
opportunities to build the business through some modestly-sized
acquisitions over the years."
Levy said JLL Partners has no plans to take the combined
company public. JLL tapped capital mostly from JLL Partners Fund
VI LP, with some contribution from JLL Fund V for its $489
JLL, a mid-market buyout shop, reached beyond its average
$150 million check per deal, partly out of faith in Patheon Inc
CEO Jim Mullen's ability to run the combined company.
Mullen joined Patheon, a listed company on the Toronto Exchange,
in 2011 after heading up Biogen, where he oversaw the merger of
Biogen and Idec that created Biogen Idec. Patheon will go
private when the deal closes.
"Running a $2 billion revenue business for Jim Mullen is not
a new challenge," Levy said. "We've had a terrific working
experience with Jim. He's proven his turnaround experience and
so we feel comfortable with him. And we see some significant
opportunities with the new assets we're acquiring, to improve
those as well."
JLL, which is marking its 25th anniversary this year,
invested in Patheon in 2007. Since then, the firm has increased
its EBITDA to a run rate of $190 million from $70 million, on a
combination of organic growth and acquisitions.
Patheon provides drug development and manufacturing
outsourcing services to the pharmaceutical, biotechnology, and
specialty pharmaceutical industries, as well as selling
pharmaceutical development services.
DSM's Pharmaceutical Products unit provides customer
manufacturing services, including research and development,
clinical trials, commercial production and packaging. The
combined firm is being billed as a leading global contract
development and manufacturing organization with projected sales
of around $2 billion.
Under the terms of the deal, JLL will pay $489 million in
cash to the combined company, and DSM will contribute DSM
Pharmaceutical Products and receive a note for $200 million.
DSM Pharmaceutical Products will be valued at $670 million.
The combined company, which is being called NewCo for now, will
acquire Patheon for $9.32 per share in cash, resulting in a
total enterprise value for Patheon of about $2 billion.
On the deal front, Stephan Doboczky, a member of the
managing board at DSM, said the firm may take a small breather
after nearly $3 billion in acquisitions in the last three years
as it repositioned itself in the nutrition and advanced
"We may do deals in the future, but we're focusing on
integration right now rather than a shopping spree," he said.