Patheon: JLL Offer “Signifciantly Undervalues” the Company

Patheon Inc. (TSX: PTI) said that a special committee determined that a US$2 per share takeover offer from JLL Partners “significantly undervalues” the company. JLL currently holds a 30% stake in Patheon, but said earlier this month that it would commence an offer for the remaining shares. Patheon is a Canadian provider of contract development and manufacturing services to the global pharmaceutical industry. 



Patheon Inc. (“Patheon” or the “Company”) (TSX:PTI), announced today that independent financial advisor BMO Capital Markets has provided the Company’s Special Committee of independent directors with a formal valuation that places the value of Patheon’s restricted voting shares within a range of US$4.20 to US$5.00 per share (C$5.29 to C$6.30 based on exchange rates on February 19, 2009).  This valuation was based on analysis of a number of factors, including the Company’s historical and prospective financial information.


JLL Patheon Holdings LLC (“JLL”), an affiliate of JLL Partners, Inc. of New York, announced on December 8, 2008, that it intended to make an unsolicited offer to acquire any or all of the outstanding restricted voting shares of Patheon that it does not already own at a price of US$2.00 per share in cash.  The independent valuation was required by applicable securities laws since the offer proposed by JLL would be considered an “insider bid”.  JLL holds 1,650,000 restricted voting shares or 1.8% of the outstanding restricted voting shares of Patheon.  JLL also holds preferred shares convertible into approximately 28.6% of the restricted voting shares of Patheon at a price of $4.77 per share. 


Based on the valuation provided by BMO Capital Markets and the review it has conducted to date with its legal and financial advisors, the Special Committee unanimously believes that the proposed JLL offer substantially undervalues the Company, its earnings potential and future growth prospects.


The Special Committee believes that the JLL proposal would provide far less value to shareholders than could be achieved if Patheon were to continue as an independent company and successfully execute its five-year strategic plan.


It is the Special Committee’s view that the JLL proposal is opportunistic and, when announced, was attempting to take advantage of a rapidly declining stock market and its impact on Patheon’s share price.  The JLL proposal was also made immediately before Patheon announced positive results for fiscal 2008.


“Patheon has taken significant steps to reposition its business and increase its efficiency, and we expect to continue to make progress on our strategic growth plan, for the benefit of all shareholders,” said Paul Currie, Chairman of the Special Committee. “We appreciate the input that we have received from shareholders to date, and we look forward to continuing this dialogue as we work to seize the exciting opportunities available under our plan.”


The Special Committee has provided the independent valuation prepared by BMO Capital Markets to JLL, which is now in a position to withdraw, revise or proceed with its proposal. Should JLL proceed with a formal offer, shareholders will have at least 35 days to consider the offer and the Board of Directors would provide a recommendation to shareholders within 15 days of the mailing of the offer.


The Special Committee will continue to provide timely information to shareholders as needed and reminds Patheon shareholders that no offer has yet been made for their shares of the Company.  There is no need for shareholders to take any action at this time.




Patheon Inc. (TSX:PTI; is a leading global provider of contract development and manufacturing services to the global pharmaceutical industry.  Patheon prides itself in providing the highest quality products and services to more than 300 of the world’s leading pharmaceutical and biotechnology companies. Patheon’s services range from preclinical development through commercial manufacturing of a full array of dosage forms including parenteral, solid, semi-solid and liquid forms.  Patheon uses many innovative technologies including single-use disposables, Liquid-Filled Hard Capsules and a variety of modified release technologies.


Patheon’s comprehensive range of fully integrated Pharmaceutical Development Services includes pre-formulation, formulation, analytical development, clinical manufacturing, scale-up and commercialization.  Patheon can take customers direct to clinic with global clinical packaging and distribution services and Patheon’s Quick to Clinic™ programs can accelerate early phase development project to clinical trials while minimizing the consumption of valuable API.


Patheon’s integrated development and manufacturing network of 11 facilities, and 6 development centers across North America and Europe, strives to ensure that customer products can be launched with confidence anywhere in the world.