Royal DSM to spin off pharmaceutical business in US$2.6bn deal

Private equity firm JLL Partners will form a new company by combining DSM Pharmaceutical Products with Patheon

Royal DSM is to spin off its pharmaceuticals business in a deal that will create a US$2.6bn drugmaking business.

The Dutch firm will sell the business to private equity firm JLL Partners, which will form the new company by combining DSM Pharmaceutical Products with Patheon, the drug manufacturer in which it is majority shareholder.

Subject to customary conditions, the deal is expected to close in the first half of next year.

The name of the new company is yet to be announced, but DSM says it will be a leading global contract development and manufacturing organisation (CDMO) with anticipated sales of around $2bn. It will be 51% owned by JLL and 49% by DSM.

Provisionally called NewCo, the company will focus on drug products and APIs with a range of technologies and will offer end-to-end solutions to Big Pharma and biotech companies, as well as specialist pharma companies, generics and emerging pharma companies.

The combined company will also be a leader in proprietary softgel formulations for over-the-counter, prescription and nutritional consumer products.

It will have a global footprint of 23 locations across North America, Europe, Latin America and Australia and around 8,300 employees.

Once the transaction is completed, NewCo will add scale and new capabilities and technologies to expand its end-to-end service offering.

This is for DSM Pharmaceutical Products the perfect way to accelerate growth and for DSM to maximise value for this business

JLL will contribute $489m in cash to NewCo and DSM will contribute DSM Pharmaceutical Products (DPP) and receive $200m, thereby valuing DPP at $670m.

NewCo has entered into a definitive agreement to acquire Patheon for $9.32 per share, which will value Patheon at approximately $1.95bn.

In the 12 months ending 31 July 2013, Patheon had revenues of $943m. The company employs around 5,900 people.

Jim Mullen, currently CEO of Patheon, will become CEO of NewCo upon completion.

Mullen joined Patheon in 2011 as Chief Executive. Prior to this, he was CEO and President of biotechnology company Biogen Idec.

Feike Sijbesma, CEO and Chairman of the DSM Managing Board, said: 'Fully in line with our strategy, this is for DSM Pharmaceutical Products the perfect way to accelerate growth and for DSM to maximise value for this business.'

Paul Levy, Managing Director of JLL Partners and Chairman of the Board of Patheon added: 'This partnership demonstrates JLL's commitment to building companies that create value, fill unmet needs and drive excellence within their respective industries.'

Companies