JLL Partners, a middle-market private equity firm, and Royal DSM, a global life sciences and materials sciences company, have created a new global contract development and manufacturing organization (CDMO) for the pharmaceutical industry, with anticipated sales of around $2 billion. It will be 51% owned by JLL and 49% owned by DSM.

The name of the company (provisionally called NewCo) will be announced in the coming months. NewCo will be formed by combining DSM’s business group DSM Pharmaceutical Products (DPP) with CDMO Patheon, after a successful completion of the transaction.

NewCo will have an end-to-end offering from finished dosage (drug products) to active substances (APIs) and a global footprint of 23 locations across North America, Europe, Latin America and Australia with about 8,300 employees.

NewCo will add scale and new value chain capabilities/technologies to expand its end-to-end service offering. NewCo will operate as an independent standalone company.

JLL will contribute $489 million in cash to NewCo, and DSM will contribute DSM Pharmaceutical Products (DPP) and receive a seller note of $200 million, thereby valuing DPP at $670 million. NewCo has entered into a definitive agreement to effect a Plan of Arrangement pursuant to the Canada Business Corporations Act (POA) with Patheon under which NewCo would acquire Patheon for $9.32 per share in cash resulting in a total enterprise value for Patheon of approximately $1.95 billion.

The combined company will be a provider in proprietary softgel formulations for over-the-counter, prescription and nutritional consumer products. The exclusive synthesis products and intermediates are targeted to the crop protection, personal care and fine chemicals products industries. 

Jim Mullen, current CEO of Patheon, will be appointed CEO of NewCo upon completion of the transaction. Mullen joined Patheon in 2011 as CEO. Previously, he was CEO and president at Biogen Idec. He has over 30 years of industry experience, ranging from biotechnology and pharmaceuticals to specialty chemicals, as well as extensive experience in pharmaceutical and biotech manufacturing, engineering, sales, marketing and mergers and acquisitions.