Danisco has cut a deal to sell its flavours division to Firmenich that will let it focus resources on its bioingredients, texturants and sweeteners competencies - while still keeping some interest in flavours through a partnership with the buyer.
Danisco confirmed late Wednesday that it was in negotiations over the sale of its flavour division, but throughout the business day declined to disclose any more details. The sale to Firmenich was announced last night.
Firmenich is expected to pay around DKK 3.36 bn (€0.45bn) for the business - the enterprise value corresponding to 2.2 times the 2006/7 revenue. The deal is subject to regulatory approval, and is tipped to be completed around the end of June.
For Danisco, the move is explained as one that allows it to focus on biotechnology - areas in which it has seen organic growth, and channelled investment with the acquisition of Rhodia Food Ingredients in 2004 (cultures) and Genencor (enzymes) in 2005.
The company says it is now one of the top three players in the market for bioingredients, texturants and sweeteners.
In flavours, on the other hand, its 2006/7 revenue was around DKK1.5bn (€0.2bn) - only two to three per cent of the global market.
The global flavours and fragrance market has seen considerable consolidation recently - most notably Givaudan's acquisition of Quest this year for CHF2.8bn (€1.7bn).
However Danisco has stressed that its flavours divestment should be seen as a "value-creating and forward-looking initiative". It plans to channel more financial and managerial resources into its other two ingredient divisions.
But the terms of the deal allow Danisco to keep a finger in the flavours pie though a strategic partnership with Firmenich.
The companies have not expounded on how exactly this relationship will work, but Firmenich said it is intended to bring together "the best in taste and texture to deliver comprehensive flavour and food ingredients solutions to targeted segments of the market".
This partnership will be rolled out in the months following the closure of the acquisition.
For Firmenich's part, it has said that the acquisition complements its own position - particularly since Danisco has focused firmly on natural and nature-identical flavours.
It says it is now set to become "the world leader in ingredients for fragrances and flavours… enlarging the creative scope of its perfumers and flavourists".
Specifically, the acquisition will expand its product offering and market coverage in vanilla, ice cream and beverage bases, and reinforce its position in citrus and the dairy sector.
Jean-Marc Bruel, chairman of privately-owned Firmenich, said: "The purchase of Danisco's flavour division is in line with Firmenich's long term strategy based on industry-leading organic growth and targeted acquisitions that complement our product portfolio."
Swiss Firmenich, which was founded in 1895, is the largest private firm in flavours and fragrances and one of the top three in the world overall. It saw revenues of CHF2.3bn (€1.4bn) in the year ended June 30 2006.