Biotech product development company Thermo Fisher Scientific announced that it has agreed to buy Dutch drug ingredients maker Patheon NV for $5.2 billion as it seems to turn into a one-stop shop for contract drug making and manufacturing.
Details of the Agreement
The Patheon deal offers $35 a share price counting $2 billion of net balance as well putting the cost of the deal from $5.2 billion to $7.2 billion.
DSM NV and JLL Patheon’s major shareholders has accepted the $35 per share which is 66 percent premium to the $21 a share price at which the two sold shares to the public last July and a 35 percent premium over the drug maker’s share price last Friday prior deal announcement.
Patheon which has approximately 9,000 personnel worldwide and made 2016 revenue of about $1.9 billion will become a part of Thermo Fisher’s laboratory products and services division when the deal closes.
The arrangement will also provide Thermo Fisher the drug maker’s manufacturing potentials which can help the biotech product maker to take hold of a bigger portion of the fragmented contract in the high-growth complex development and manufacturing service (CDMO) market which the company estimates to be about $40 billion.
The deal would also offer a quick post-initial public offering (IPO) exit for DSM NV.
Paul Levy, co-founder of JLL which helped formed Patheon and other JLL executives who personally invested $70 will acquire about $336 million from their share in addition to tens of millions of dollars in incentive fees.
Thermo Fisher came to a deal with JLL and DSM NV to tender their holdings representing about 73 percent of Patheon shares which puts the company to securing 80 percent requisite under Dutch tender conditions.
Biotech product maker’s earnings will be adjusted by 30 percent once the deal is done and it expects approximately a $120 million in overall investments by the third year after the transaction closes which is likely by the end of the 2017.
Acquiring Patheon would also add to the $22 billion in purchases announced by Thermo Fisher over the past five years.
Last January, the biotech product maker reported its fourth quarter profit that beaten analysts’ forecast and a first quarter April 2017 earnings report which exceeds analysts’ estimates as well.
Revenues for the current period gained 11 percent year over year to $4.77 billion while sales surpassed forecasts by 1.9 percent to $4.68 billion driven by previous purchases.
Following the earnings report, shares of Thermo Fisher at that time boosted up to $162.19 on open and closing $3.6 higher to $165.79 compared to previous day closing at $158.88.
Meanwhile, Patheon’s fourth quarter financial highlights report for fiscal 2016 included revenue of $1.9 billion while net profit from ongoing operation was $35 million. Adjusted EBITDA was $395 million.
For its fiscal 2017 first quarter results, revenue grew 13 percent to $457 million compared to first quarter 2016. Adjusted EBITDA in the first quarter was $83 million, 40 percent higher than the earlier year period.
Net profit for ongoing operations was $28 million.
On the other hand, shares of Thermo Fisher are currently trading with a 0.4 percent gain on Tuesday to 172.26 as of 19:30 GMT while Patheon’s shares last Friday closed with 33 percent gain to 34.60.
It is shown that by 18:30 of previous trading session, shares of Thermo Fisher has reached its highest growth of 171.95.
So far, shares of Thermo Fisher are gaining. Hence, we recommend investors to stay on the sidelines and to keep an eye on its movement for the time being until further indications of a strong affirmation of increase.