JLL sees roll-up potential for pharma services after $2.6B deal

Thu Nov 21, 2013 10:39am EST
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By Steve Gelsi

Nov 21 (Buyouts Magazine) - JLL Partners co-founder Paul S. Levy is expecting more acquisitions after the firm closed a $2.6 billion carve-out transaction to combine its Patheon Inc portfolio company with Dutch-based DSM's pharmaceutical unit.

The deal drew $200 million in co-investments from the New York firm's limited partners.

Levy told Buyouts the transaction resulted from talks between the two companies' management teams, with no formal auction process. The combined company will rank as the largest in the pharmaceutical services business, he said.

The company will be named after the acquisition closes as expected next year, he said. JLL will hold a 51 percent stake, with DSM retaining 49 percent.

"The pharmaceutical manufacturing industry is highly fragmented," Levy said. "We'd like to think we'll have some good opportunities to build the business through some modestly-sized acquisitions over the years."

Levy said JLL Partners has no plans to take the combined company public. JLL tapped capital mostly from JLL Partners Fund VI LP, with some contribution from JLL Fund V for its $489 million contribution.

JLL, a mid-market buyout shop, reached beyond its average $150 million check per deal, partly out of faith in Patheon Inc CEO Jim Mullen's ability to run the combined company. Mullen joined Patheon, a listed company on the Toronto Exchange, in 2011 after heading up Biogen, where he oversaw the merger of Biogen and Idec that created Biogen Idec. Patheon will go private when the deal closes.

"Running a $2 billion revenue business for Jim Mullen is not a new challenge," Levy said. "We've had a terrific working experience with Jim. He's proven his turnaround experience and so we feel comfortable with him. And we see some significant opportunities with the new assets we're acquiring, to improve those as well."   Continued...