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DSM's pharma biz reports slight growth before Patheon merger

By Dan Stanton , 26-Feb-2014
Last updated on 26-Feb-2014 at 15:54 GMT

DSM has reported modest growth in its pharma business as a shareholders advisory firm comes out in favour of the upcoming merger with Patheon.

For the full year 2013, DSM reported flat sales and low profitability from its pharma contracting services joint venture with Scinochem, with revenue of $184m (€134m) up just 1% on 2012.

However, for the Pharmaceutical Products business - now earmarked as discontinued operations - the firm described the 5% growth in sales to $158m and the 6% growth in volume as having “made significant progress” and, if a proposed merger with Patheon owners JLL is approved, “will support a good start for the value-creating venture with JLL Partners.”

Though the prospect of the merger first announced in November is expected to be completed in the next few months, the DSM management team were relatively tight-lipped during a conference call this morning to discuss end of year results.

CFO Rolf-Dieter Schwalb told investors the impairment of $120m expected as contributions to the new entity in November had risen to $152m, but said the change had been discussed with JLL and - along with being affected by changing exchange rates - was part of a derisking strategy.

Patheon to vote

However, the total impairment will not be known until the deal is completed (expected in the first half 2014) and one hurdle to overcome is a special meeting of Patheon shareholders next month to vote on whether or not to go ahead with the merger.

One independent proxy advisory firm, Institutional Shareholder Services (ISS), however, has published a report recommending its subscribers come out in favour of such a deal.

Amongst other things, the report describes the substantial premium minority shareholders will receive for their restricted voting shares and the favourable market reaction to the proposed arrangement, Patheon reported in an SEC filing  today.

“Patheon also announces that all merger control approvals that the parties have determined are required in connection with the Arrangement, including the approval of the Federal Competition Commission in Mexico, have been obtained,” the filing said.

If approved, the new company (currently known as NewCo) will become the world’s second largest contract manufacturing organisation (CMO), according to a report compiled before the November merger announcement by Canadian investment bank BMO .

The new company will comprise of 23 facilities across North America, Europe, Latin America and Australia and will employ around 8,300 people.

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