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Mergers and acquisitions deep freeze starts to thaw

Recent deals seem to signal a thawing of the mergers and acquisitions landscape in the natural products industry, which had been locked in a deep freeze since the beginning of the financial crisis in late 2008.

In early January, DuPont rocked the supplements world when it announced a $6.3 billion acquisition of Danish ingredients giant Danisco. The size of the transaction overshadowed two deals in late 2010 involving algae ingredient manufacturers and the Christmas week acquisition of Cognis by BASF. Taken together, these deals seem to signal a thawing of the mergers and acquisitions landscape, which had been locked in a deep freeze since the beginning of the financial crisis in late 2008.

"Danisco is a premier company, a long-time successful partner of DuPont and a proven innovator committed to sustainable growth," said DuPont CEO Ellen Kullman. "This transaction is a perfect strategic fit with our growth opportunities. Danisco has two well-positioned global businesses that strongly complement our current biotechnology capabilities, R&D pipeline and specialty food ingredients."

DuPont already has recently rolled out a GMO omega-3 source in order to offer a diversified ingredient in the leading market category (despite the fact that DuPont’s New Harvest is not natural). Danisco is a leader in the probiotics field, so DuPont now has significant plays in the top two ingredient categories.

Algae grows

Until the DuPont/Danisco deal came along, it was the December deal between DSM and Martek that had people talking. That was a $1 billion deal to purchase Maryland-based Martek, which is best known for its life’sDHA brand of omega-3s derived from algae, a popular ingredient in the infant nutrition arena.

DSM had already announced a significant expansion of its existing research and development facilities in North America. In early 2010 the company unveiled plans for a Nutrition Innovation Center at its North American headquarters in Parsippany, N.J.  

And in another deal in the algae sector, San Francisco-based renewable oils producer Solazyme announced in November it had formed a joint venture with French ingredients supplier Roquette to tap into the potential to produce food ingredients derived from micro-algae on a massive scale.

The two companies said they had set up a 50-50 owned joint venture called Solazyme-Roquette Nutritionals. The venture will fund and build a manufacturing plant with the capacity to produce tens of thousands of tons of micro-algae-based ingredients every year for use in mainstream food applications.

So what's making algae so attractive right now? The answer seems to be the number of boxes it ticks. First, it's vegan; second, it's allergen free; third, it's sustainable; and fourth, and most exciting from a commercial standpoint, with the right processes it can be manipulated to produce a whole range of different ingredients. As Ken Plasse, Solazyme's vice president of nutritionals, said: "Depending on the fermentation conditions, or depending on how you feed it, you get different results."

Simple process, big benefits

Solazyme-Roquette's production process sounds misleadingly simple: algae are placed in a fermentation tank, much like those used for beer and wine, and fed carbohydrate-rich biowaste – typically switch grass or sugar cane. A few days later, the algae are dried into a powder, which breaks the cells, releasing all the goodness within.

And this is the exciting bit, as Plasse explained: "When you liberate the cells by breaking them, they provide some amazing, really strong functional properties. The beauty of our technology platform is that it really allows us to have a large variety of products that complement the broad-based food ingredient universe – oils, protein, fiber and then eventually micronutrients and phospholipids."

The first concept to emerge from the Solazyme-Roquette stable will be an oil- and fiber-based powder boasting what Plasse described as "pretty amazing" properties that could dramatically improve the nutritional profiles of everyday foodstuffs.

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