M&A

30 November, 2009

UPDATE 1-Patheon, JLL settle legal battle

* Nine-member board to include four JLL nominees

* Patheon to pay $1.5 million in costs

* Patheon shares drop 5 percent (In U.S. dollars unless noted)

TORONTO, Nov 30 (Reuters) - Patheon Inc (PTI.TO) said on Monday it had settled a lengthy legal battle with its majority shareholder, JLL Partners, putting an end to almost a year of uncertainty for the Canadian drugmaker.

The settlement includes the appointment of a new board and negates the need for a special shareholders meeting scheduled for mid-December, which had called for a new slate of directors at the contract drug manufacturer.

The agreement brings to a close a long-running battle that had pitted JLL against a special committee of Patheon that was eager to sell to Switzerland's Lonza Group (LONN.VX).

Lonza withdrew its $460 million offer to acquire Patheon in October, citing the cost and opposition from JLL, which owns 57 percent of Patheon.

JLL had said the financial environment was not right to sell Patheon, which has struggled as its key pharmaceutical company customers cut costs to shore up balance sheets.

"It's good for everyone. We didn't want to see the legal battle go into a full-blown cash-flow drain on the company," Maher Yaghi, a biotech analyst at Desjardins Securities in Montreal, said of Patheon's settlement with JLL.

"This was not a concern to me other than the cash which would have been dispersed."

The agreement provides for a nine-member board until March 2011: four JLL nominees, Patheon Chief Executive Wes Wheeler, three independent directors, and minority shareholder Joaquin Viso. Before the settlement JLL had three board members.

Viso had called for the Dec. 15 meeting to oust Patheon directors appointed earlier.

As part of the settlement, JLL agreed not to acquire any additional restricted voting shares of the company for one year. It also agreed not to buy additional shares of Patheon until April 2012 unless allowed under a standstill agreement.

In return, Patheon agreed to pay $1.5 million in settlement costs.

Both Patheon and JLL were not immediately available for comment.

Patheon shares were down 5 percent at C$2.45 on the Toronto Stock Exchange.

($1=$1.06 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson) ((scott.anderson@reuters.com; +1 416 941 8106; Reuters Messaging: scott.anderson.reuters.com@reuters.net))

Source: http://www.reuters.com