Patheon IPO delivers 3.5x return for JLL

  • JLL combined Patheon with DSM unit in 2014
  • Patheon IPO priced at $21 a share on July 22, raised $625 mln
  • JLL made 3x on 2007 investment in Patheon in 2014

JLL Partners is showing a 3.5x return on its 2014 investment in Patheon NV after the initial public offering of the provider of outsourced pharmaceutical development and manufacturing services, according to a source.

Patheon went public on July 22 at $21 a share and raised $625 million, the largest healthcare IPO in the U.S. this year. At last check, the stock traded at about $25 a share.

After the IPO, Dutch conglomerate DSM continues to own about 34 percent of Patheon, while JLL holds about 43 percent.

The 3.5x multiple includes JLL’s stake in the company at roughly the IPO price and factors in the value of the Patheon shares that the New York firm still owns, the source said.

JLL insiders invested $70 million in Patheon in 2014, while JLL’s limited partners and co-investors put up $150 million for Patheon. Both earned 3.5x in the IPO.

Second bite

JLL first invested in Patheon in 2007 with $250 million in equity, according to a source.

In 2014, JLL invested in Patheon for the second time when it combined it with a unit of DSM, creating a new entity. JLL tapped capital mostly from JLL Partners Fund VI LP, with some contribution from JLL Fund V, for its investment in the combined firm.

JLL used capital in the 2014 transaction to pay itself and LPs from the 2007 transaction for a gain of 3x. The 3.5x return JLL reaped on the IPO is from the 2014 second investment.

Since closing the deal with DSM in 2014, JLL and Patheon stayed busy with a number of transactions.

In 2015, JLL Partners said it would fund a roughly $500 million dividend recap through high-yield debt for Patheon. The IPO helped pay back this $538 million dividend, funded through senior payment-in-kind-toggle notes.

In March 2015, Patheon acquired Irix Pharmaceuticals Inc, a specialist in difficult-to-manufacture pharmaceutical ingredients, for $161 million. The same month, it bought Agere Pharmaceuticals Inc, a leader in complex solubility technology, for $27 million.

In 2014, Patheon paid $257.2 million to buy Gallus BioPharmaceuticals, a contract manufacturer.

Action Item: Patheon’s IPOs prospectus,

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