Thermo Fisher Scientific is acquiring Patheon, which has been at the center of the consolidation that has swept through contract manufacturing in recent years, in a deal valued at $7.2 billion.
Waltham, Massachusetts-based Thermo Fisher announced late Monday it would pay $35 a share for Patheon, a sum that amounts to about $5.2 billion, and assume another $2 billion in debt for the Durham, North Carolina-based CDMO.
Thermo Fisher said it was a logical deal for a company that provides services and equipment to the biopharma industry, and offers it entry into the high-growth contract manufacturing business—a market which it estimated to be worth about $40 billion. Patheon went public only last summer, but had revenues of about $1.9 billion in its last fiscal year, compared to the $18 billion in sales Thermo Fisher racked up in 2016.
Thermo Fisher expects the deal to be “immediately and significantly accretive” adding about $0.30 a share to its earnings in the first full year on the books. It also expects to realize about $90 million in cost savings by the third year and $30 million in adjusted operating income benefits.
"Our combined capabilities will enhance our unique value proposition for these customers, create significant value for our shareholders and further accelerate our company's growth," Thermo Fisher CEO Marc N. Casper, said in a statement.
James Mullen, CEO of Patheon, said, "Over the past several years, we have increased our capabilities to become a leading CDMO provider in a highly fragmented market.” He said Thermo Fisher’s “proven track record of disciplined M&A and successful integrations” will take Patheon to the next level.
Under the helm of Mullen, the former CEO of Biogen, Patheon has grown from just another small contract operator into a top tier player. In 2014, its then owner, private equity investor JLL Partners, struck a $2.6 billion deal to merge Patheon with Netherlands-based Royal DSM, creating DPx Holdings.
Mullen chalked up a string of acquisitions for Patheon starting with a $255 million purchase of softgel specialist Banner Pharmacaps in 2012. In August 2014, the company acquired Gallus BioPharmaceuticals and picked up its first U.S. biologicals facility in the process. In 2015, it acquired specialty API maker IRIX.
Last year, DPx held an initial public offering, selling off 30.5 million shares and raising about $625 million in a transaction that analysts said gave the company a market value of $2.9 billion. Patheon employs about 9,000 people across 11 countries.