In the latest development Patheon said its committee of independent directors has now retained the services of an independent financial advisor – BMO Capital Markets – to help it gauge an appropriate response to the proposal.
In addition, the panel has engaged Goldman Sachs as its financial advisor to assist in the evaluation of any offer, and also retained Davies Ward Phillips & Vineberg as legal counsel.
In December, JLL Patheon Holdings, a unit of private equity group JLL Partners, said it was planning to launch an unsolicited cash offer to acquire the remaining 71 per cent of Patheon for C$2.54 ($2.09) per share.
Ahead of JLL Patheon Holdings’ announcement the shares were languishing at under a dollar, but the shares reacted to the potential bid and are currently trading ahead of the $2 mark.
Although the offer will essentially be between JLL and other shareholders, Patheon is required by securities laws to carry out a formal valuation of the company. Until this is completed JLL is unable to put forward its offer formally, but said it hoped to do so before the end of this month.
At the time of writing no formal offer had been made, and Patheon’s only comment on the affair is that it believes JLL’s interest is an endorsement of the progress the company has made in recent quarters.
“We see it as a vote of confidence,” commented Patheon’s CEO Wes Wheeler. “But we have a business to run in the meantime and we’ll let the process unfold as it will.”
While investors have been known to try to wrest control of companies from under-performing management, that seems unlikely to be the case with Patheon which underwent a dramatic turnaround in 2008 after struggling in recent years.
Indeed, the bid announcement came just ahead of Patheon’s fourth-quarter results statement, at which the company reported healthy profits after performance was held back in 2006 and 2007 in part as a result of its purchase of Puerto Rican operation Mova Pharmaceuticals in 2004.
On a conference call to mark the firm’s results statement, Patheon CEO Wes Wheeler pointed out that the firm has achieved four consecutive quarters of earnings and margin growth, helped mainly by recovery at the Puerto Rican operations.
For the first time since the acquisition the Puerto Rican operations posted a small profit, helped by the shuttering of the loss-making Carolina facility after the firm failed to find a buyer for the plant. The closure of Carolina is now expected to take place on January 31.
Market share
Wheeler is confident of the firm’s future. On the call he noted that Patheon’s development services business has about a 10 per cent share of a market valued at around $1.4bn and expected to grow at a rate of 10 per cent a year to reach $2.3bn in 2013. He believes Patheon ranks third or fourth in this market
On the contract manufacturing side, Patheon holds around 6 per cent of an $11.5bn market which is growing in low single digits, and is ranked number two.