Patheon would be taken private under a €145 million ($195 million) deal that would entail the company being acquired by Royal DSM’s business group, combined with the buyer’s pharmaceutical products operations, then spun off into a new joint venture designed to create a powerhouse contract development and manufacturing organization (CDMO).

The new CDMO—provisionally named NewCo, with a permanent name to be announced in coming months—would offer an array of services from finished dosages for drugs to manufacturing of APIs, with about 8,300 employees working from 23 locations across North America, Europe, Latin America, and Australia.

NewCo would have combined annual sales of $2 billion, and be 51% owned by private-equity firm JLL Partners, with the remainder owned by DSM. JLL, which owns 55.7% of Patheon stock, will contribute $489 million cash to the new CDMO, while DSM will contribute its DSM Pharmaceutical Products (DPP) unit in return for a seller note of $200 million, thereby valuing DPP at $670 million.

“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,” Feike Sijbesma, CEO and chairman of DSM’s managing board, said in a statement. “By creating a global top CDMO organization I am convinced that NewCo as a standalone company will be able to create substantial value. 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.”

The deal will be financed through a combination of committed debt and equity financing, with a combined $1.65 billion in debt financing committed by J.P. Morgan, UBS, Jefferies, Morgan Stanley, and KeyBank, in addition to equity financing that includes JLL’s $489 million and DSM’s contribution of DPP.

At $9.32 per share cash, NewCo’s acquisition of Patheon represents a 64% premium to Patheon’s closing share price Monday of C$5.94 ($5.69); a 73% premium to the volume weighted average trading price of Patheon’s restricted voting shares on the Toronto Stock Exchange over the past 20 trading days; and a 43% premium to the 52-week high of those restricted voting shares.

The deal has won support from Patheon’s board of directors, along with Patheon’s executive officer and JLL, which collectively own about 66% of the acquired company’s outstanding shares. Founded in 1988, JLL has since committed about $4.2 billion across six funds, focused on healthcare and other sectors.

Patheon, which has 5,900 employees worldwide, finished the year ending July 31 with $943 million in revenues and $188 million in pro forma consolidated earnings before interest, taxes, depreciation, and amortization (EBIDTA). Earlier this year, Patheon returned to profitability through revenue gains in commercial manufacturing, and in the operations acquired last year when the company bought softgel manufacturer Banner Pharmacaps for $255 million.

Jim Mullen, Patheon’s CEO behind a successful turnaround of the company since 2011, will hold the same position with NewCo upon completion of the deal. Before joining Patheon, Mullen served as CEO and president at Biogen Idec.

DPP provides contract development and manufacturing services to the pharmaceutical, biopharmaceutical, and agrochemical industries with a focus on drug products and APIs. In 2012 DPP realized net sales of €543 million ($733.9 million) with around 2,400 employees.

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