Danisco, Genencor deal goes ahead
spot after the same German regulatory authorities that delayed the
deal give the green light, reports Lindsey Partos.
Danisco said it now expects the deal to close by tomorrow, when the Danish firm will 'accept all tendered shares'.
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; building on the 42 per cent stake the firm that Danisco already owned.
But for the second time in a month, on 6 April Danisco extended the expiration date for its tender offer of the biotech firm, after the German authorities pushed it for more information relating to anti-trust issues.
" The competition authorities of Germany have finished their review and have granted clearance of these transactions," says Danisco's CEO Alf Duch-Pedersen.
With leading market positions for a host of its ingredients, from emulsifiers (number one) to stabilisers, the Genencor deal pushes Danisco into the number two enzyme position 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.
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.
