TORONTO, March 25 /CNW/ - Patheon Inc. ("Patheon" or the "Company")
(TSX:PTI), today announced that the Board of Directors has recommended that
shareholders reject the unsolicited offer (the "Offer") by JLL Patheon
Holdings LLC ("JLL" or the "Offeror") to acquire, at a price of US$2.00 each,
any and all of the issued and outstanding restricted voting shares (the
"Restricted Voting Shares") of Patheon not owned by JLL, its affiliates,
associates or certain persons acting jointly or in concert with JLL.
The Board determined that, based on the unanimous recommendation of a
special committee of independent directors (the "Special Committee"), the
Offer is INADEQUATE and advises holders ("Shareholders") of Restricted Voting
Shares of Patheon to NOT TENDER their shares to the Offer. All of the
independent members of the Board voted in favour of this recommendation. Each
of JLL's three nominees on the Board declared his conflict of interest and
refrained from voting, JLL's joint actor Joaquin B. Viso declared his interest
and refrained from voting, and the Company's CEO, Wesley P. Wheeler,
abstained.
The Board's recommendation and its reasons are included in a Directors'
Circular to be mailed to shareholders and filed with securities regulators
shortly. The Circular and related documents will be available at www.sedar.com
and at the Company's website www.patheon.com.
In making its recommendation to the Board, the Special Committee
considered a number of factors, including an independent valuation by BMO
Capital Markets and an inadequacy opinion it had received from Goldman, Sachs
& Co. (as described below), and concluded that the Offer is inadequate,
coercive and opportunistic.
Specifically, the Special Committee believes and notes that:
Patheon Continuing as an Independent Company is a Viable and Compelling
Alternative to the JLL Offer- The Special Committee believes that Shareholders have the opportunity
to realize substantial value, well in excess of the JLL Offer, by
retaining their investment in the Company and benefiting from the
realization of Patheon's potential. JLL's statement in the Offering
Circular that the Special Committee has not found a viable
alternative to its Offer is incorrect: JLL appears not to want
Shareholders to recognize that this attractive path is available to
them. In fact, this is the alternative to the Offer that the Special
Committee is recommending to Shareholders.
JLL and its affiliates currently own only 1.8% of the Restricted Voting
Shares
- Where the Offering Circular says that the Offeror and its affiliates
own approximately 30% of the outstanding Restricted Voting Shares on
an "as-if converted" basis, this ownership consists principally of
the additional Restricted Voting Shares that the Offeror could
acquire, at a conversion price of US$4.77 per share, if it were to
exercise the conversion rights attached to its preferred shares. This
conversion right is over US$100 million out-of-the-money relative to
the Offer price, and there is no indication that the Offeror intends
to convert its preferred shares at the US$4.77 per share conversion
price.
The Offer Price is Inadequate and Substantially Undervalues Patheon
- The $2.00 Offer price fails to adequately compensate Shareholders for
execution of Patheon's business plan
- The timing of the Offer is opportunistic
- The Offer price is more than 30% below the six-month and one-year
average trading prices for the Restricted Voting Shares for the
periods prior to the trading day immediately preceding the
announcement of JLL's intention to make the Offer
- The $2.00 Offer price is substantially below the independent
valuation range of US$4.20 to US$5.00 (C$5.15 to C$6.13 based on
current exchange rates)
- Consensus research analyst target prices are between C$4.00 and
C$5.00
- Major shareholders, who the Special Committee believes hold shares
representing more than a majority of the Restricted Voting Shares of
Patheon not held by JLL, have advised the Special Committee that they
consider the Offer to be inadequate
- Joaquin B. Viso, Patheon's largest single holder of Restricted Voting
Shares and a director, has advised that he does not intend to accept
the Offer
- The Offer price is substantially below the prices JLL paid for recent
purchases
The Offer Treats Shareholders Differently, is Coercive and is
Structurally Unfair to Patheon Shareholders
- JLL has announced that it is giving an option to receive special
rights and protections to a group of Patheon Shareholders (the "MOVA
Group"), led by Joaquin B. Viso, who received their Restricted Voting
Shares when Patheon acquired MOVA Pharmaceutical Corporation in 2004,
in a separate side deal (the "Voting Agreement" and "Stockholders'
Agreement")
- These special rights and protections are not being made available to
other Shareholders
- The Voting Agreement and Stockholders' Agreement do not require the
MOVA Group to accept the Offer, and Joaquin B. Viso has advised that
he does not intend to accept the Offer
- The Offer is not subject to any minimum tender condition
- The Offer provides no protection to those Shareholders who do not
tender
- The Special Committee believes that the Offer, and the Voting
Agreement and Stockholders' Agreement, violate the standstill
provisions of the Investor Agreement between JLL and Patheon.Patheon Shareholders are encouraged to review these and other factors
considered by the Special Committee and the Board of Directors which are
discussed under "Reasons for Recommendation" in the Directors' Circular.
BMO Capital Markets, an independent valuator, has prepared a formal
valuation of the Restricted Voting Shares under the supervision of the Special
Committee, as required by applicable securities laws (the "Valuation"). The
conclusion of the Valuation is that, in the opinion of BMO Capital Markets, as
at the date of the Valuation, the fair market value of the Restricted Voting
Shares is in the range of US$4.20 to US$5.00. The Offer price is 57% below the
mid-point of the valuation range. The full text of the Valuation is included
in the Offering Circular and as Appendix "A" to the Directors' Circular.
On March 18, 2009, Goldman, Sachs & Co. rendered its opinion to the
Special Committee, subsequently confirmed in writing, that, as of March 18,
2009 and based upon and subject to the factors and assumptions set forth in
the written opinion, the consideration proposed to be paid to the holders of
the Restricted Voting Shares (other than the Offeror, any of its affiliates
and the MOVA Group) pursuant to the Offer was inadequate from a financial
point of view to such holders. The full text of the written opinion of Goldman
Sachs & Co., dated March 18, 2009, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken in connection with the opinion is included as Appendix "B" to the
Directors' Circular. Goldman Sachs provided its opinion solely for the
information and assistance of the Special Committee in connection with its
consideration of the Offer. The Goldman Sachs opinion is not a recommendation
as to whether or not any holder of Restricted Voting Shares should tender
Restricted Voting Shares in connection with the Offer or take any other action
with respect to the Offer, any subsequent transaction pursuant to which the
Offeror or an affiliate of the Offeror may acquire all Restricted Voting
Shares not acquired pursuant to the Offer or any other matter.
ABOUT PATHEON
Patheon Inc. (TSX:PTI; www.patheon.com) 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.
Caution Concerning Forward-Looking Statements
This news release may contain forward-looking statements which reflect
management's expectations regarding the Company's future growth of operations,
performance (both operational and financial) and business prospects and
opportunities. These statements are made in the context of the risks and
uncertainties that are outlined in the Company's public documents, which can
be accessed on our website at www.patheon.com or on SEDAR at www.sedar.com.
For further information: Special Committee, Information Agent for the
Special Committee, Kingsdale Shareholder Services, 1-866-851-3212; Media, John
Lute, Lute & Company, (416) 929-5883, email jlute@luteco.com
