Patheon seeks legal advice on JLL hostile bid

Contract manufacturer Patheon believes the bid could violate Canadian securities laws “by failing to treat all Patheon shareholders equally​,” and because the offering documents lack some necessary information and has been presented in a “misleading manner​.”

In a letter to the Ontario Securities Commission, William Gula, Patheon’s legal representative, described JLL’s action as “coercive, abusive of the public shareholders of Patheon, and contrary to the public interest.​”

Last week, Patheon rejected JLL’s bid of $2 per share as “inadequate​” and recommended that its shareholders decline the offer. The company’s own financial advisors have suggested that a fair offer for restricted voting shares would be in the $4.20-$5.00 range.

The bid is set to expire on April 16, unless it is extended or withdrawn by JLL Patheon, part of the larger JLL group, which has built a 40 per cent stake in Patheon’s issued and outstanding restricted voting shares.

Patheon wants the Ontario Securities Commission to put a block on any trading in Patheon’s shares by JLL “until identical consideration is offered to all holders of Patheon's Restricted Voting Shares and until all deficiencies in the offering circular are corrected.​”

At the heart of Patheon’s concerns is that JLL appears to be offering “special rights and protections​” to one group of Patheon shareholders – known collectively as the Mova Group.

Patheon acquired Puerto Rican contract manufacturer Mova in 2004, and has seen its earnings and margins pegged back as a result. The company is starting to get back on its feet in the wake of a major restructuring exercise by CEO Wes Wheeler, which has seen one of Mova’s plants close and streamlining at other facilities.

The Mova group of shareholders, led by Joaquin Viso, received restricted voting shares as part of the acquisition.

In addition to the alleged preferential treatment offered to the Mova Group, Patheon is also concerned that the investors are “party to a collateral agreement which provides consideration of greater value.​”

Given the April 16 deadline, Patheon has requested a hearing be called “no later than April 13​,” or that JLL’s trading in Patheon restricted voting shares be restricted until the Commission has ruled on the issue.