Danisco extends timeline for Genencor buy, again

Related tags Danisco Eastman chemical company

Danisco's move into the number two enzyme position delayed for the
second time as German regulators pose questions on anti-trust

The world's largest ingredients firm Danisco last month announced a €419 million deal to buy Eastman Chemical's 42 per cent stake in the NASDAQ listed enzyme player Genencor. Danisco already has a 42 per cent slice of the firm.

But for the second time in a month Danisco has extended the expiration date of its tender offer, this time to the 19 April, as the Danish firm awaits a response from the regulators.

"We're hoping for feedback within a fortnight,"​ says a Danisco spokesperson, confirming to FoodNavigator.com that the takeover deal is still within the previously announced timeframe of May.

The German regulators are the only regulatory bodies to question the Danisco-Genencor deal, with their queries focusing on anti-trust issues.

In the event that the Genencor-Danisco deal, as it stands, is turned down, regulators could impose new terms for the acquisition, for example a spin off of certain elements of the business.

But if cleared, Danisco will become the world's number two enzyme player, behind the category leader Novozymes.

Novozymes dominates the market with a 50 to 60 per cent share, and Genencor in second place, with about 30 per cent.

The Genencor takeover move surprised observers, who had predicted the opposite; that Danisco might shuffle off its Genencor stake to fuel growth and acquisitions in the food ingredients sector.

Investment in ingredients is deemed essential for the group to counterbalance lost income from the sugar unit when sugar quota reform arrives in 2006. Investment bank Goldman Sachs predicts sugar profits for Danisco could drop by as much as 40 per cent.

But Michael von Bülow, vice president communications and investor relations at Danisco asserts the acquisition fits snugly into the firm's strategy.

"We would like to expand our presence in biotechnology. This acquisition also gives us the opportunity to build on our enzyme knowledge,"​ he explains.

Not only this, von Bulow claims expertise at Genencor will be transferable to other ingredients units in the group, bringing added value to a range of areas, such as production techniques.

In addition to enzymes, Danisco supplies emulsifiers - where it holds the number one slot - flavours, cultures, bio-preservation, stabilisers, functional systems and sweeteners.

Arguably, some of the surprise in Danisco's move to buy Genencor is sourced in the current assumption that enzymes are not high margin ingredients.

According to a report earlier this year from Business Communications Company, the €1.53 billion enzyme market is currently staring at relatively flat growth of about 2 to 3 per cent, expected up to 2009.

Danisco and its subsidiaries currently own approximately 41.6 per cent of the outstanding shares of common stock of Genencor and have a contingent agreement with Eastman Chemical company to buy its approximately 41.6 per cent holding of Genencor common stock at $15 a share.

Danisco, through DH Subsidiary, has offered to buy the balance of the outstanding shares of Genencor at $19.25 per share in cash.

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