HMOs are essential groups of milk sugars that naturally occur in human breast milk and nurture the infant microbiome (including bacteria with a probiotic effect).
Functional ingredients, especially HMOs and probiotics, are driving the premiumization trend in infant formula and there is a significant potential to increase the penetration of these two ingredients, and also to create synergistic blends in the future, Chr. Hansen said.
HMOs are produced industrially by fermentation, which is a core capability of Chr. Hansen.
The market for HMOs is estimated to be more than €400m ($470m) by 2025, and more than €1bn ($1.17bn) long-term.
Jennewein has six commercialized HMOs, a global customer base and a portfolio of more than 200 patents granted in key markets.
The acquisition is fully in line with Chr. Hansen’s 2025 strategy of pursuing acquisitions that extend and strengthen its microbial and fermentation technology platforms.
Mauricio Graber, CEO of Chr. Hansen, said, “I am truly excited that we have reached an agreement to acquire Jennewein. The fast-growing HMO market is a new space that we have been following with strong interest for some years. In truth, we are making a long-term investment and commitment to HMOs, which I am convinced will bring long-term value creation to our shareholders. Given the addressable market and the expected growth rates, this is now our 5th strategic lighthouse and will be accretive to our organic growth beyond 2020/21. HMOs also fit perfectly with our purpose to, ‘Grow a better world. Naturally’, as these are some of nature’s most intricate nutritional components for the most precious and vulnerable – newborn infants and young children.”
Graber said Jennewein is a strong fit to the Chr. Hansen microbial portfolio, as its fermentation platform is also scalable and offers good long-term margin potential as volumes increase.
“Jennewein is a leader in the HMO industry with a superior product offering and IP portfolio, and we believe the company holds a leading position in this relatively new and very exciting market. Jennewein’s products will have strong functional synergies with our probiotic bacteria, such as LGG and BB-12 and combining the companies will create an even stronger competitive advantage. Furthermore, we believe that the very talented employees of Jennewein will be a strong cultural fit to Chr. Hansen.”
Dr Stefan Jennewein, founder and CEO of Jennewein, said, “Today, we are starting a new chapter in the pre- and synbiotic market by combining the strengths of Chr. Hansen and Jennewein Biotechnologie. 15 years ago, Jennewein started with the ambition to make human milk oligosaccharides available for all infants. Today, HMOs have become a must-have for all premium infant formula. Whereas initially we were very much intrigued by the anti-infective effects of HMOs, in particular against human pathogenic viruses, today it is clear that even more beneficial effects can be expected from the combination of HMOs with probiotics. Thus, Chr. Hansen is the perfect match for Jennewein to bring the HMO story to the next level.”
Chr. Hansen plans to invest more than €200m ($235m) in production assets until 2025, including an investment in a brown-field factory, to expand HMO capacity to supply the expected demand, a part of which has already been secured through long-term contracts.
Chr. Hansen said its financial outlook for 2019/20 is unaffected, and the long-term financial ambition also remains unchanged. The HMO business will be part of the Health & Nutrition area and will operate as a separate, full value chain.
Jennewein is expected to generate sales of around €50m ($58.7m) in 2021, but with a net EBIT loss. The total consideration is €310m ($364m) on a debt-free basis. The transaction is expected to be completed in September 2020.
Jennewein was founded by Dr Stefan Jennewein and Dr Klaus Jennewein. Dr Stefan Jennewein will transfer into a role as chief science and technology advisor, while Dr Klaus Jennewein will retire from the company.
The company has around 100 employees headquartered in Bonn, Germany, with production partly outsourced to contract manufacturers.