New York-based JLL will merge the DSM business with its majority-owned drug maker Patheon, paying $489 million in cash for 51 percent of the new firm. DSM will own the rest.
DSM, the world’s No. 1 vitamin maker, has spent more than 2.2 billion euros ($3 billion) since 2010 buying into less cyclical businesses such as food ingredients and high-end plastics, and moving away from lower-margin bulk chemicals.
Tuesday’s deal resolves issues with its drugs business and leaves one other major problem – how to cut its exposure to low-margin caprolactam, the raw material for a type of nylon.
DSM shares rose nearly 4 percent to an all-time high of 60.2 euros on the news.
Under terms of the deal, Patheon will be bought for $9.32 per share, a 64 percent premium to its Nov 18 closing price, giving it an enterprise value of $1.95 billion.
The new company will have sales of about $2 billion in 2014, and will supply pharmaceutical customers with a range of products, from intermediates such as antibodies, proteins and enzymes to finished medication.
DSM’s pharma division – a top supplier of ingredients in beta lactam antibiotics – had annual sales of 543 million euros and the group said recently it wanted a financially strong partner that could help it to expand in Asia.
On a conference call with analysts, Chief Financial Officer Rolf-Dieter Schwalb said that the new company will add to DSM’s earnings from 2015 and would be a strong, standalone business with an interest in expanding through acquisitions and no need for cash injections from either shareholder.
J.P. Morgan advised DSM on the pharma deal, while Morgan Stanley and Jefferies advised JLL.
Sara Webb is a reporter for Reuters News in Amsterdam