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Thermo Fisher Scientific Buys Patheon for $5.2B

May 15, 2017

Thermo 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 net debt.

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 position.

•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

The 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 financing condition.

Advisors

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.

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