Patheon Announces US$150 Million Investment by JLL Partners



    TORONTO, March 2 /CNW/ - Patheon Inc. (TSX: PTI) today announced that it
has entered into a definitive agreement with JLL Partners, under which JLL
Partners Fund V, L.P. will purchase US$150 million of convertible preferred
shares of the Company through a private placement. The transaction is subject
to shareholder approval, satisfactory refinancing or restructuring of the
remaining portion of Patheon's North American debt following the investment,
and customary closing conditions.
    "This investment will establish a stronger financial foundation for
Patheon that will allow the Company to continue to build on its position as a
leader in pharmaceutical manufacturing and development services," said Peter
Green, Chairman, Patheon Inc. and Chair of the Special Committee of the Board
established in September 2006 to pursue strategic and financial alternatives
for the Company.
    "In JLL Partners, we have found an experienced long-term investor who
recognizes the strong fundamentals of Patheon's business and shares our goal
of building greater sustained value for all of our shareholders," Mr. Green
said. "As part of the strategic alternatives review process, the Special
Committee of the Board, with the assistance of its advisors and Patheon's
management, examined all available options, including the potential sale of
the Company. This investment by JLL Partners was the best available
arrangement for our shareholders."
    "This capital restructuring is an important step forward for Patheon,"
said Riccardo Trecroce, Chief Executive Officer, Patheon Inc. "We will now
have the financial certainty and stability to ensure continued focus on
superior client service, profitability improvement and manufacturing
excellence -- key elements of our plan to grow our business successfully."
    Patheon intends to use the net proceeds of the offering, expected to be
approximately US$138 million, to pay down a portion of its outstanding debt of
approximately US$238 million under its existing North American credit
facilities. JLL's investment is conditional on Patheon concurrently
refinancing the remaining portion of its long-term debt under its North
American loan agreement, or entering into an amendment to the existing credit
agreement with its North American lenders in light of the reduced level of
debt.
    JLL Partners Inc. is a private equity investment firm, founded in 1988
and based in New York, that currently manages, through various funds,
approximately US$3.2 billion in committed capital. JLL has made investments
across a variety of industries including healthcare, financial services and
building products and services. In particular, JLL has made several successful
investments in healthcare including AdvancePCS, Iasis Healthcare, Medical Card
System, Kendall International and OrNda Healthcare.
    "Our investment into Patheon is based on our great confidence in the
Company and the tremendous opportunities before it," said Ramsey Frank, Senior
Managing Director of JLL. "The Company is extremely well positioned as a
leader in the attractive market for drug development and contract
manufacturing services for the pharmaceutical industry, with a talented
management team and world-class operations."
    The purchase is subject to approval by the Toronto Stock Exchange and
approval by a majority of Patheon's shareholders. Patheon intends to seek
shareholder approval at its upcoming Annual and Special Meeting of
Shareholders on Thursday, April 19, 2007. Each of the directors and senior
officers of the Company, including Joaquin Viso, the Company's largest single
shareholder, has entered into a voting agreement with JLL Partners under which
they have agreed to vote in favour of the transaction approval at the meeting.
    Further details about the proposed investment will be provided in the
Management Proxy Circular for the 2007 Annual and Special Meeting of
Shareholders, which will be available to shareholders and on Patheon's web
site shortly. Subject to these approvals, Patheon is targeting to close the
transaction before April 30, 2007.
    The Company was advised during the strategic alternatives review process
by RBC Capital Markets and Greenhill & Co.

    Further details regarding JLL Partners' investment

    Under the terms of the agreement, JLL will invest in convertible
preferred shares, which will pay an annual 8.50% dividend, payable quarterly.
During the first 30 months, no cash dividends will be payable and, instead,
economically equivalent adjustments will be made to the shares' conversion
rate and liquidation preference. The preferred shares will be convertible into
Patheon common shares at any time at the holder's option at a price equivalent
to C$5.55 per common share. Patheon will be entitled to require the holder to
convert into common shares if, at any time after 30 months from the date of
issuance, the market price of the Patheon common shares on the TSX exceeds
C$9.16 for a period of at least 60 days. The Company will be required to
redeem the shares on the 10th anniversary of the date of issuance or upon the
occurrence of a change of control of the Company.
    The convertible preferred shares will have the right to vote, together
with the holders of the common shares, on an as-if converted basis, in respect
of all matters other than the election of directors. As a result, based on JLL
Partners' investment, JLL will initially hold approximately 25 per cent of the
voting rights of Patheon. In addition, JLL will be entitled to elect three
directors to the Company's nine-member Board of Directors (subject to
reduction if JLL sells some of its shares), and will have certain other
special approval rights and registration rights.

    Webcast conference call

    Patheon Inc. will host a webcast conference call to discuss this
announcement on Friday, March 2, 2007 at 10:00 a.m. (Eastern Standard Time).
Representing Patheon on the call will be: Peter Green, Chairman of Patheon
Inc. and Riccardo Trecroce, Chief Executive Officer of Patheon Inc. The call
will begin with remarks, followed by a question-and-answer period.
    Interested parties are invited to access the call live, in listen-only
mode, via telephone at (416) 644-3416 (Toronto and International) or toll-free
at 1-800-731-6941. (Please call between five and fifteen minutes in advance.)
A live audio webcast will be available on www.patheon.com. (Please note that
Windows Media Player or Real Player is required.)
    A telephone replay of the conference call will be available from Friday,
March 2, 2007 until Friday, March 16, 2007 by calling 416-640-1917 or the
following toll-free number: 1-877-289-8525 and entering identification number
21221920 followed by the "No." key. An archived audio webcast will be
available on www.patheon.com for three months.

    Caution Concerning Forward-Looking Statements

    This news release contains forward-looking statements which reflect
management's expectations regarding Patheon's future growth, results of
operations, performance (both operational and financial) and business
prospects and opportunities. Wherever possible, words such as "plans",
"expects" or "does not expect", "forecasts", "anticipates" or "does not
anticipate", "believes", "intends" and similar expressions or statements that
certain actions, events or results "may", "could", "would", "might" or "will"
be taken, occur or be achieved have been used to identify these forward-
looking statements. Although the forward-looking statements contained in this
press release reflect management's current assumptions based upon information
currently available to management and what management believes to be
reasonable assumptions, Patheon cannot be certain that actual results will be
consistent with these forward-looking statements. Forward-looking statements
necessarily involve significant known and unknown risks, assumptions and
uncertainties that may cause Patheon's actual results, performance, prospects
and opportunities in future periods to differ materially from those expressed
or implied by such forward-looking statements. These risks and uncertainties
include, among other things: the inability to close the offering as a result
of the failure to achieve the closing conditions, including the receipt of
regulatory or shareholder approvals on terms acceptable to Patheon and the
subscribers; the market demand for client products; dependence on key clients;
the ability to identify and secure new contracts; regulatory matters,
including compliance with pharmaceutical regulations; management of expanded
operations; international operations risks; currency risks; competition;
product liability claims; integration of new operations; financing risks; and
interest rate risks. Although Patheon has attempted to identify important
risks and factors that could cause actual actions, events or results to differ
materially from those described in the forward-looking statements, there may
be other factors and risks that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance that forward-
looking statements will prove to be accurate, and results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements. Except as otherwise stated, these forward-looking statements are
made as of the date of this news release and, except as required by law,
Patheon assumes no obligation to update or revise them to reflect new events
or circumstances.

    About Patheon

    Patheon (TSX:PTI; www.patheon.com) is a leading global provider of drug
development and manufacturing services to the international pharmaceutical
industry. Patheon operates a network of 14 facilities in the United States,
Canada and Europe, employing more than 5,600 people and serving a client base
of more than 250 pharmaceutical and biotechnology companies.

    About JLL

    Founded in 1988, JLL Partners is a leading private equity investment firm
with $3.2 million of capital under management. JLL's investment philosophy is
to partner with outstanding management teams and invest with them in companies
or situations that they can continue to grow into market leaders. JLL has
invested in the following sectors: healthcare services, financial services,
building products, medical products, consumer products, business services,
chemicals, broadcasting, transportation and automotive. In particular, JLL has
made a number of successful investments in healthcare, including AdvancePCS,
Iasis Healthcare, Medical Card System, Kendall International and OrNda
Healthcare. The firm also has a longstanding track record of building
effective partnerships with company management. More information on JLL can be
found on their website, www.jllpartners.com.

    %SEDAR: 00001700E




For further information:

For further information: Mr. Riccardo Trecroce, Chief Executive Officer, 
Patheon Inc., Tel: (905) 812-6877, Fax: (905) 812-6613, Email: 
rtrecroce@patheon.com; Mr. Peter Green, Chairman, Patheon Inc., Tel: 
(905) 812-6760, Fax: (905) 812-6613, Email: pgreen@patheon.com; Ms. Shelley 
Jourard, Director, Corporate Communications, Patheon Inc., Tel: 
(905) 812-6614, Fax: (905) 812-6613, Email: sjourard@patheon.com; Mr. Brian 
Wade, Director of Investor and Public Relations, JLL Partners, Inc., Tel: 
(212) 210-9317, Email: b.wade@jllpartners.com

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