Scientific Buys Patheon for $5.2B
May 15, 2017
Fisher Scientific and Patheon have approved Thermo Fisher's acquisition
of Patheon. Thermo Fisher will commence a tender offer to acquire all of
the issued and outstanding shares of Patheon for $35.00 per share in
cash. The transaction represents a purchase price of approximately $7.2
billion, which includes the assumption of approximately $2.0 billion of
Patheon provides comprehensive, integrated and highly customizable
solutions as well as the expertise to help biopharmaceutical companies
of all sizes satisfy complex development and manufacturing needs. It is
a leader in the high-growth, $40 billion CDMO market, which is fueled by
growing customer demand for end-to-end solutions, flexible and scalable
capacity, and regulatory expertise. Patheon has an extensive network of
state-of-the-art facilities primarily in North America and Europe, and
approximately 9,000 professionals worldwide. The company generated 2016
revenue of approximately $1.9 billion and will become part of Thermo
Fisher's Laboratory Products and Services Segment.
"Patheon's development and manufacturing capabilities are an excellent
complement to our industry-leading offering for the biopharma market,"
said Marc N. Casper, president and chief executive officer of Thermo
Fisher Scientific. "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."
James C. Mullen, chief executive officer of Patheon, said, "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."
Casper added, "We look forward to welcoming our new colleagues from
Patheon to Thermo Fisher. Patheon's commitment to quality and service
excellence is directly aligned with our focus on helping our biopharma
customers accelerate innovation and drive productivity."
Benefits of the Transaction
•Patheon Provides Entry into the Attractive, High-growth CDMO Market.
Patheon serves a large, fragmented market growing in the mid-single to
high-single digits, which is fueled by strong demand for outsourcing
services that allow customers to simplify their supply-chain networks.
By offering both small- and large-molecule development and manufacturing
solutions, the company helps customers reduce the time and cost of
delivering medicines to market. Patheon has invested significantly to
become a scale player in the CDMO market and extend its leadership
•Combination Significantly Strengthens Thermo Fisher's Unique Value
Proposition for Pharmaceutical and Biotech Customers by Adding Highly
Complementary Services. Thermo Fisher is the leading supplier to the
biopharmaceutical industry, supporting research, clinical trials and
production. It has become a trusted outsourcing partner by providing
clinical trials logistics services over the past decade. Combining these
capabilities with Patheon's CDMO services will allow Thermo Fisher to be
a stronger partner for pharmaceutical and biotech customers.
•Creates Substantial Synergies and Positions Combined Company to Further
Accelerate Growth. The combined company's extensive and deep
relationships in the biopharma industry will enable significant
cross-selling opportunities. For example, 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.
•Delivers Attractive Financial Benefits. The transaction is expected to
be immediately and significantly accretive to Thermo Fisher's adjusted
EPS1 by $0.30 in the first full year after close. Thermo Fisher expects
to realize total synergies of approximately $120 million by year three
following the close, consisting of approximately $90 million of cost
synergies and approximately $30 million of adjusted operating income1
benefit from revenue-related synergies.
Approvals and Financing
transaction, which is expected to be completed by the end of 2017, is
subject to the satisfaction of customary closing conditions, including
the receipt of applicable regulatory approvals, the adoption of certain
resolutions relating to the transaction at an Extraordinary General
Meeting of Patheon's shareholders, and completion of the tender offer.
Thermo Fisher has entered into tender and support agreements with
affiliates of JLL Partners and Royal DSM, whose collective holdings
represent approximately 73% of Patheon shares, under which they will
tender their shares in the transaction.
Thermo Fisher has obtained committed debt financing from Goldman Sachs
Bank USA and Goldman Sachs Lending Partners LLC. The company expects to
finance the purchase price with debt of approximately $5.2 billion and
equity of approximately $2 billion. The offer is not subject to any
Goldman Sachs & Co. LLC is acting as financial advisor to Thermo Fisher,
and Wachtell, Lipton, Rosen & Katz is serving as legal counsel. Morgan
Stanley & Co. LLC is acting as financial advisor to Patheon, and Skadden,
Arps, Slate, Meagher & Flom LLP is serving as legal counsel.