Huge news came through the mergers and acquisitions pipeline on Monday, Jan. 10. DuPont, one of the world’s leading chemical and manufacturing companies, agreed to purchase Denmark-based Danisco in a deal valued at $6.3 billion. This instantly makes DuPont a market leader in probiotics, enzymes and food ingredients.
"Danisco is a premier company, a long-time successful partner of DuPont and a proven innovator committed to sustainable growth," said DuPont Chair and CEO Ellen Kullman. "This transaction is a perfect strategic fit with our growth opportunities,” Kullman said. "Danisco has two well-positioned global businesses that strongly complement our current biotechnology capabilities, R&D pipeline, and specialty food ingredients.”
Three immediate observations rise to mind in the wake of the news that chemical giant DuPont has acquired ingredients leader Danisco for $5.8 billion.
New Hope Supply Nework editor-in-chief Todd Runestad says big-time M&A activity will continue to be the rule going forward. This was talked about at the end of 2010 and was given credence with the Christmas week acquisition of Martek by DSM for a cool $1.09 billion. Too, synthetic chemicals and ingredients leader BASF gobbled up Cognis in December for just north of $4 billion. Look for Big Pharma to take over a leading supplements manufacturer in the months to come. Publicly traded ingredients suppliers could also be targets. We’re thinking krill here.
It’s also important to note that DuPont and Danisco had already been longtime partners; in 2008 they formed a $140 million joint venture to produce ethanol. Danisco is also a player in enzymes.
- Supply Network director Len Monheit says DuPont has already recently rolled out a GMO omega-3 source in order to offer a diversified ingredient offering in the leading natural ingredient on the market (despite the fact that DuPont’s New Harvest is not natural). Danisco was a leader in the probiotics field, so DuPont now has significant plays in the top two ingredients – omega-3s and probiotics.
Economies of scale will drive DuPont’s business, but smaller-tier companies should not fret yet – opportunities remain in probiotics because the bigger they come the less they innovate, and there is plenty of gas left in the probiotics innovation tank. Will DuPont allocate revenue toward the research side of the probiotics equation? According to DuPont, the company has set its 2011 earnings per share outlook at a range of $3.30 to $3.60 per share. The anticipated impact of this transaction would reduce that outlook by $.30 to $.45 per share on a reported basis.
According to DuPont, the acquisition is expected to be financed with about $3 billion in existing cash and the remainder in debt. The transaction is expected to close early in the second quarter.