Press Release: Patheon Announces $150 Million Investment by JLL Partners

Patheon Announces US$150 Million Investment by JLL Partners TORONTO, March 2 /CNW/ - Patheon Inc. today announced that it has entered into a definitive agreement with JLL Partners, under which JLL Partners Fund V, L.P. will purchase US$150 million of convertible preferred shares of the Company through a private placement. The transaction is subject to shareholder approval, satisfactory refinancing or restructuring of the remaining portion of Patheon's North American debt following the investment, and customary closing conditions. "This investment will establish a stronger financial foundation for Patheon that will allow the Company to continue to build on its position as a leader in pharmaceutical manufacturing and development services," said Peter Green, Chairman, Patheon Inc. and Chair of the Special Committee of the Board established in September 2006 to pursue strategic and financial alternatives for the Company. "In JLL Partners, we have found an experienced long-term investor who recognizes the strong fundamentals of Patheon's business and shares our goal of building greater sustained value for all of our shareholders," Mr. Green said. "As part of the strategic alternatives review process, the Special Committee of the Board, with the assistance of its advisors and Patheon's management, examined all available options, including the potential sale of the Company. This investment by JLL Partners was the best available arrangement for our shareholders." "This capital restructuring is an important step forward for Patheon," said Riccardo Trecroce, Chief Executive Officer, Patheon Inc. "We will now have the financial certainty and stability to ensure continued focus on superior client service, profitability improvement and manufacturing excellence -- key elements of our plan to grow our business successfully." Patheon intends to use the net proceeds of the offering, expected to be approximately US$138 million, to pay down a portion of its outstanding debt of approximately US$238 million under its existing North American credit facilities. JLL's investment is conditional on Patheon concurrently refinancing the remaining portion of its long-term debt under its North American loan agreement, or entering into an amendment to the existing credit agreement with its North American lenders in light of the reduced level of debt. JLL Partners Inc. is a private equity investment firm, founded in 1988 and based in New York, that currently manages, through various funds, approximately US$3.2 billion in committed capital. JLL has made investments across a variety of industries including healthcare, financial services and building products and services. In particular, JLL has made several successful investments in healthcare including AdvancePCS, Iasis Healthcare, Medical Card System, Kendall International and OrNda Healthcare. "Our investment into Patheon is based on our great confidence in the Company and the tremendous opportunities before it," said Ramsey Frank, Senior Managing Director of JLL. "The Company is extremely well positioned as a leader in the attractive market for drug development and contract manufacturing services for the pharmaceutical industry, with a talented management team and world-class operations." The purchase is subject to approval by the Toronto Stock Exchange and approval by a majority of Patheon's shareholders. Patheon intends to seek shareholder approval at its upcoming Annual and Special Meeting of Shareholders on Thursday, April 19, 2007. Each of the directors and senior officers of the Company, including Joaquin Viso, the Company's largest single shareholder, has entered into a voting agreement with JLL Partners under which they have agreed to vote in favour of the transaction approval at the meeting. Further details about the proposed investment will be provided in the Management Proxy Circular for the 2007 Annual and Special Meeting of Shareholders, which will be available to shareholders and on Patheon's web site shortly. Subject to these approvals, Patheon is targeting to close the transaction before April 30, 2007. The Company was advised during the strategic alternatives review process by RBC Capital Markets and Greenhill & Co. Further details regarding JLL Partners' investment Under the terms of the agreement, JLL will invest in convertible preferred shares, which will pay an annual 8.50% dividend, payable quarterly. During the first 30 months, no cash dividends will be payable and, instead, economically equivalent adjustments will be made to the shares' conversion rate and liquidation preference. The preferred shares will be convertible into Patheon common shares at any time at the holder's option at a price equivalent to C$5.55 per common share. Patheon will be entitled to require the holder to convert into common shares if, at any time after 30 months from the date of issuance, the market price of the Patheon common shares on the TSX exceeds C$9.16 for a period of at least 60 days. The Company will be required to redeem the shares on the 10th anniversary of the date of issuance or upon the occurrence of a change of control of the Company. The convertible preferred shares will have the right to vote, together with the holders of the common shares, on an as-if converted basis, in respect of all matters other than the election of directors. As a result, based on JLL Partners' investment, JLL will initially hold approximately 25 per cent of the voting rights of Patheon. In addition, JLL will be entitled to elect three directors to the Company's nine-member Board of Directors (subject to reduction if JLL sells some of its shares), and will have certain other special approval rights and registration rights. Webcast conference call Patheon Inc. will host a webcast conference call to discuss this announcement on Friday, March 2, 2007 at 10:00 a.m. (Eastern Standard Time). Representing Patheon on the call will be: Peter Green, Chairman of Patheon Inc. and Riccardo Trecroce, Chief Executive Officer of Patheon Inc. The call will begin with remarks, followed by a question-and-answer period. Interested parties are invited to access the call live, in listen-only mode, via telephone at (416) 644-3416 (Toronto and International) or toll-free at 1-800-731-6941. (Please call between five and fifteen minutes in advance.) A live audio webcast will be available on (Please note that Windows Media Player or Real Player is required.) A telephone replay of the conference call will be available from Friday, March 2, 2007 until Friday, March 16, 2007 by calling 416-640-1917 or the following toll-free number: 1-877-289-8525 and entering identification number 21221920 followed by the "No." key. An archived audio webcast will be available on for three months. Caution Concerning Forward-Looking Statements This news release contains forward-looking statements which reflect management's expectations regarding Patheon's future growth, results of operations, performance (both operational and financial) and business prospects and opportunities. Wherever possible, words such as "plans", "expects" or "does not expect", "forecasts", "anticipates" or "does not anticipate", "believes", "intends" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved have been used to identify these forward- looking statements. Although the forward-looking statements contained in this press release reflect management's current assumptions based upon information currently available to management and what management believes to be reasonable assumptions, Patheon cannot be certain that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause Patheon's actual results, performance, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: the inability to close the offering as a result of the failure to achieve the closing conditions, including the receipt of regulatory or shareholder approvals on terms acceptable to Patheon and the subscribers; the market demand for client products; dependence on key clients; the ability to identify and secure new contracts; regulatory matters, including compliance with pharmaceutical regulations; management of expanded operations; international operations risks; currency risks; competition; product liability claims; integration of new operations; financing risks; and interest rate risks. Although Patheon has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward- looking statements will prove to be accurate, and results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Except as otherwise stated, these forward-looking statements are made as of the date of this news release and, except as required by law, Patheon assumes no obligation to update or revise them to reflect new events or circumstances. About Patheon Patheon (TSX:PTI; is a leading global provider of drug development and manufacturing services to the international pharmaceutical industry. Patheon operates a network of 14 facilities in the United States, Canada and Europe, employing more than 5,600 people and serving a client base of more than 250 pharmaceutical and biotechnology companies. About JLL Founded in 1988, JLL Partners is a leading private equity investment firm with $3.2 million of capital under management. JLL's investment philosophy is to partner with outstanding management teams and invest with them in companies or situations that they can continue to grow into market leaders. JLL has invested in the following sectors: healthcare services, financial services, building products, medical products, consumer products, business services, chemicals, broadcasting, transportation and automotive. In particular, JLL has made a number of successful investments in healthcare, including AdvancePCS, Iasis Healthcare, Medical Card System, Kendall International and OrNda Healthcare. The firm also has a longstanding track record of building effective partnerships with company management. More information on JLL can be found on their website, For further information Mr. Riccardo Trecroce, Chief Executive Officer, Patheon Inc., Tel: (905) 812-6877, Fax: (905) 812-6613, Email: [email protected] Mr. Peter Green, Chairman, Patheon Inc., Tel: (905) 812-6760, Fax: (905) 812-6613, Email: [email protected] Ms. Shelley Jourard, Director, Corporate Communications, Patheon Inc., Tel: (905) 812-6614, Fax: (905) 812-6613, Email: [email protected] Mr. Brian Wade, Director of Investor and Public Relations, JLL Partners, Inc., Tel: (212) 210-9317, Email: [email protected]