DuPont Co agreed to acquire Danisco for $5.8 billion, beating approaches from rival suitors for the Danish maker of enzymes used in food and biofuels.
DuPont will pay 665 krone ($115) a share, the Wilmington, Delaware-based company said yesterday in a statement. That’s 25 per cent more than Danisco’s 530-krone January 7 closing share price. The transaction includes assuming $500 million of debt.
Chief Executive Officer Ellen Kullman pounced on Danisco five months after it lifted a cap on shareholder voting rights, seeing a chance to expand in biofuels amid a paucity of takeover targets. Danisco Chairman Jorgen Tandrup said in an interview today that there were a few bidders that “right to the final moment” were competing to make the best offer.
“It’s a good deal for DuPont, and with a 25 per cent premium to the share price it’s also a good deal for Danisco shareholders,” said Jens Houe Thomsen, an analyst at Jyske Bank. “Danisco has the world’s second-best biofuels business and a strong cooperation with DuPont already.”
Under CEO Tom Knutzen, Danisco has given investors a total return of 53 per cent over the past 12 months, prior to today, the second-biggest gain on the Bloomberg Europe Food Index. The stock jumped 26 per cent to 664 krone in Copenhagen trading as of 10.51 am DuPont traded at the equivalent of $48.97 in Germany, down from a US close of $49.79.
Good fit
The enzyme market is “very attractive” as makers of detergents, animal feed and food are also turning to bacteria and catalysts to improve yields and counter input costs, Jyske Bank’s Houe Thomsen said.
Danisco selected DuPont from potential suitors as it provided the best fit and price, Tandrup said in the interview.
“We’ve had a few bidders interested in the company,” the chairman said, declining to give details. “The fit between DuPont and Danisco is very good.”
Kullman is diversifying DuPont away from stalwarts such as Kevlar bullet-resistant fabric and titanium dioxide pigment used in paint. Danisco is the world’s largest food-ingredients maker, producing sweeteners and cultures used in ice cream and cheese. Both companies already share an ethanol-producing venture.
Danisco, which once produced the liquor schnapps, will be the largest takeover by DuPont since it bought genetically modified seed-maker Pioneer Hi-Bred International Inc for $7.7 billion in 1999. There were $84.8 billion of chemical-company takeovers announced in the past year, with an average premium of 26 per cent, according to data compiled by Bloomberg.
The US company will use $3 billion of cash and use debt to finance the rest of the deal. The acquisition should close early in the second quarter and add to earnings starting in 2012, DuPont said. The deal will reduce 2011 earnings by 30 to 45 cents a share. The company had forecast full-year earnings of $3.30 to $3.60 a share. DuPont is paying 15.2 times Danisco’s earnings before interest and tax, compared with the 15.3 average of 10 food-industry deals since 2001. Deutsche Bank is Danisco’s adviser.
Hurdle removed
Danisco’s shareholders in August approved the board’s proposal to remove a restriction that limited the number of votes a single shareholder could have to no more than the equivalent of 7.5 per cent of the share capital, regardless of the holder’s stake.
Danisco’s board opted to remove the restriction at the start of 2009, “long before we had any contact to any other companies regarding this deal,” Tandrup said.
Danisco CEO Knutzen said in a May interview that he would pursue similar alliances to the DuPont one to gain “financial muscle” and defend against possible takeover approaches as the market for enzymes attracts larger rivals.
Novozymes A/S, the world’s biggest enzyme maker, added 4 per cent in Copenhagen trading. The Danish company is controlled by the Novo Foundation that can block any approaches. Smaller Danish rival Christian Hansen Holding climbed 6.9 per cent.
Other rivals include CSM, Kerry Group, McCormick & Co, Sensient Technologies and Tate & Lyle. Net income at Danisco rose 59 per cent to 369 million krone in the three months through October, beating analysts’ estimates, after earnings jumped at its Genencor unit. Genencor makes enzymes for biofuels and household detergents and accounted for 34 per cent of the company’s sales in the quarter. Danisco had $2.6 billion of sales in fiscal 2010.
