Major Shareholder Rejects Lonza Bid for Patheon

Lonza (Basel) has submitted a non-binding proposal that would see it acquire all of the Restricted Voting Shares of US-based Patheon (Research Triangle Park, NC). However, a statement released via PR Newswire by JLL, a private equity investment firm based in New York and the single largest shareholder of Patheon, has suggested that the transaction will face opposition.

"JLL is not interested in selling its position in Patheon at this time. JLL will not enter into negotiations regarding the Lonza proposal, and Patheon shareholders should be aware that a transaction with Lonza cannot occur without JLL's support," said the JLL statement.

JLL made an offer to acquire the same shares as Lonza in March 2009 for $2 per share, but the bid was described by the Patheon Special Committee as "substantially undervalued, opportunistic and coercive". Lonza, however, has offered to pay $3.55 per share, and, unsurprisingly, Patheon seems more interested in this proposal.

"Based on all the information available to it, the Special Committee's view has been that Patheon continuing as an independent company is a more attractive alternative to the JLL offer," Paul Currie, chairman of the Special Committee of Independent Directors of Patheon, explained in a joint statement issued by Lonza and Patheon. "The Special Committee also believes that the Lonza proposal would provide an excellent opportunity to secure the successful future development of Patheon, and that it is in the best interest of all Patheon shareholders to explore the Lonza proposal further."

Lonza also seems enthusiastic. "Our interest in Patheon is consistent with Lonza's strategy of expanding our offering across the pharmaceutical manufacturing value chain," Lonza's CEO, Stefan Borgas, said in the joint statement.

But whether the transaction will take place remains to be seen. Lonza has signed a confidentiality and standstill agreement, and Patheon has agreed not to negotiate an acquisition transaction with any other party until Sept. 30, 2009. However, JLL observes that it "holds Restricted Voting Shares that represent approximately 57% of the shares outstanding" and that "the Lonza proposal is conditioned on, among other things, acceptance of the Lonza proposal by the holders of at least 67% of the outstanding Patheon Restricted Voting Shares."