Patheon says JLL’s valuation is “opportunistic”

By Gareth Macdonald

- Last updated on GMT

Related tags: Stock market

Patheon says the $183m (€142m) buy-out proposal by private equity group JLL Patheon Holdings is “opportunistic” and designed to take advantage of the recent stock-market related fluctuation in its valuation.

Although it is yet to table a formal offer JLL, which holds a 28.6 per cent stake in the Canadian contractor, said in December that it was considering making a $2 per share offer for those it does not own.

Patheon’s current position is based on analysis by independent financial advisors BMO Capital Markets and Goldman Sachs that valued the firm in the $4.20 to $5.00 per share range.

The special committee formed to examine the proposal concluded that it is “opportunistic and, when announced, was [an] attempt to take advantage of a rapidly declining stock market and its impact on Patheon's share price​”.

The committee suggested that the timing of the offer, immediately prior to its announcement of fourth quarter results, further justified its conclusion about the proposal.

Paul Currie, who chaired the committee, added that: "Patheon has taken significant steps to reposition its business and increase its efficiency, and we expect to continue to make progress on our strategic growth plan​.”

While at the time JLL’s offer represented a 130 per cent premium, Patheon’s share price showed considerable improvement in the final three months of 2008 helped by a lack of acquisition charges, an ongoing efficiency drive and growth in Q4 income.

Patheon’s position is in keeping with the market reaction to JLL’s offer. In a note issued at the time, Maher Yagi, an analyst at Desjardins Securities, in Montreal, said that the offer did not reflect the true value of the company.

Yagi commented that: “the offer does not fully reflect the value of Patheon's underlying business, given the cost-cutting and business development activities the company has embarked upon​.”

The ball is now firmly in JLL’s court. Should the equity group choose to revise or proceed with the offer Patheon’s shareholders would have 35 days to respond.

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