LONDON â€" The Dutch life and materials sciences company Royal DSM said Tuesday that it will spin off its pharmaceutical manufacturing business into a $2.6 billion joint venture with the New York private-equity firm JLL Partners.
The new company would combine DSM Pharmaceutical Products with Patheon Inc., creating a contract development and pharmaceutical manufacturing company with anticipated sales of about $2 billion in 2014. The joint venture would be 51 percent owned by JLL and 49 percent by DSM.
As part of the transaction, the joint venture has launched an offer to acquire the outstanding shares of Patheon for $9.32 a share, or about $1.95 billion, representing a 64 percent premium over Monday’s closing price.
JLL and Patheon’s management and directors own about 66 percent of the outstanding shares and have signed voting agreements in support of the deal, which requires shareholder approval.
“Fully in line with our strategy, this is for DSM Pharmaceutical Products the perfect way to accelerate growth and for DSM to maximize value for this business,†said Feike Sijbesma, chairman and chief executive of DSM’s managing board. “With this partnership DSM has made a key step in the strategic transformation of its pharma activities into partnerships whilst creating maximal value for all stakeholders.â€
The deal comes as major pharmaceutical companies are increasingly outsourcing their manufacturing amid rising pressure to reduce their costs and an ongoing wave of consolidation in the industry.
DSM is the world’s largest maker of vitamin supplements, but also manufactures a variety of polymers and chemicals.
The company, with 9.1 billion euros, or $12.3 billion, in sales last year, has shifted its focus in recent years to the vitamin and nutrition market and the potential opportunities from an aging population worldwide. DSM has announced €2.4 billion in acquisitions in its vitamin and nutrition segment since 2010.
JLL also will inject $489 million in cash into the joint venture, which values DSM Pharmaceutical Products at about $670 million.
“This partnership demonstrates JLL’s commitment to building companies that create value, fill unmet needs and drive excellence within their respective industries,†said Paul S. Levy, JLL managing director and Patheon’s chairman.
Patheon had revenues of $943 million in the 12 months ended July 31, while DPP had net sales of €543 million euros in 2012.
The combined company will employ 8,300 people and have 23 locations in North America, Europe, Latin America and Australia. It will operate as an independent, standalone company.
Patheon’s chief executive, Jim Mullen, is expected to head the combined company when the deal is completed. The transaction is expected to close in the first half of 2014.
J.P. Morgan Chase was DSM’s financial adviser; Morgan Stanley and Jefferies served as financial advisers to JLL. The lead legal adviser to DSM was Latham & Watkins, Skadden, Arps, Slate, Meagher & Flom, Borden Ladner Gervais and Simpson Thacher & Bartlett served as legal advisers to JLL.
