Lonza withdrew its $460 million offer to acquire Canada’s Patheon, citing the cost and the opposition of majority shareholder
The Swiss drugs industry supplier sought to widen its product range by offering last month to acquire drug manufacturer Patheon for $3.55 a share, but it had been expected to drop the bid after its rejection by New York’s JLL Partners, which owns 57 percent of Patheon.
Lonza has moved away from specialty chemicals to focus on higher-margin pharmaceutical ingredients, helping to shield it from problems such as low-cost competition from Asia, which has affected companies like Clariant.
It was aiming to use the Patheon deal to expand into making end products. Analysts say it has plenty of other acquisition options in the same field, though the market is fragmented so it is tough to pin down what it might go for. Management has said it is in talks with two or three other players and in July said the group could spend a total of 1 billion Swiss francs ($990 million) on acquisitions without recourse to external funding.
“Given Patheon was a multi-year turnaround situation, we had a suspicion that it might take a long time to increase initially low EBIT,” said Kepler Capital Markets Analyst Florian Gaiser.
“Hence, to us Lonza’s decision comes as a relief and we believe there is a good chance the market will share that view,” Gaiser said.
A special committee of Patheon investors had still wanted to keep the door open to a Lonza deal.
“Although due diligence had been substantially completed and Lonza and Patheon continued to explore various strategic options that could be in the best interests of the two companies, they were unable to agree to acceptable terms for such a transaction,” Patheon said in a statement.
The two groups have also ended talks on other strategic options that would not involve the sale of JLL Partners’s shares, Lonza added.
(By Sam Cage)