U.S. chemicals group DuPont said on Sunday it will buy Danish food ingredients and enzymes firm Danisco for $5.8 billion to boost its position in the fast-growing food sector.
The cash deal would enable DuPont to enter a niche in the chemical industry - food additives - long dominated by smaller rival International Flavors and Fragrances Inc. It would also solidify existing cooperation between the two companies in the field of technology for advanced bioethanol.
However the acquisition will reduce DuPont's 2011 earnings of $3.30 to $3.60 per share by a range of 30 cents to 45 cents per share, the company said.
The deal is structured as a public tender offer valuing Danisco's shares at 665 Danish crowns in cash per share.
Danisco's shares closed on Friday at 530 crowns, meaning the deal is at a 25 percent premium to its closing share price.
The board of directors of Danisco has unanimously resolved that it intends to recommend that shareholders accept the offer, Danisco said in a statement.
DuPont's shares closed on Friday down 22 cents at $49.76. The company has a market capitalization of about $45 billion.
SHIFT IN FOCUS
The deal weds two very old companies. DuPont was founded in 1802 and Danisco traces its roots back to 1872 and the founding of Danish Sugar.
Traditionally, DuPont has focused on chemicals and safety and protection equipment. The firm is most well known for its iconic Kevlar bulletproof vests and Tyvek homewrap, not biologically engineered corn or soybean.
But DuPont's last high-profile acquisition, its 1999 purchase of seed maker Pioneer for $7.7 billion, began a strategy shift toward a so-called mega trend of food and nutrition.
Many analysts at the time saw the price former CEO Charles Holliday paid as too much, though few dispute now that the Pioneer buyout helped save DuPont during the recession of 2008. Holliday is no longer with the company, and now serves as chairman of Bank of America.
The Danisco acquisition would be the first major deal for chief Executive Ellen Kullman since she took control of DuPont about two years ago.
It would also offer her a chance to leave a lasting legacy on the company, the way Holliday's buyout of Pioneer continues to define his tenure.
DuPont and Danisco are already joint venture partners in developing technology for second-generation bioethanol -- biofuel made from non-food crops -- which is seen with growth potential as the United States seeks to wean itself off imported fossil fuels. Danisco has called it a $75 billion market.
DuPont, which will assume $500 million of Danisco's net debt said the deal is expected to be financed with about $3 billion in existing cash and the remainder in debt.
It expects the deal to close early in the second quarter and be cash and earnings accretive in 2012.
Danisco in December posted a bigger rise than expected in second-quarter profits, driven by efficiency measures and sales growth, and nudged up full-year guidance.
Danisco said in a statement on Monday that its activity level in November-December was satisfactory and supported the full-year 2010/11 guidance it gave on December 16.
Danisco also said that its internal plans assume an average organic growth rate for the financial years 2011/12 and 2012/13 of 7 percent per year and an EBIT margin ambition of 15.9 percent for 2012/13.
Listed on the Copenhagen bourse in 1989, Danisco shares are fairly widely held partly due to the age of the company. Seventy-five percent of the total is held by institutions and 25 percent by private investors. Roughly half of the stock is held by international investors and half domestically.
Only two shareholders, Danish public pension fund ATP and investment group BlackRock, have stakes of more than 5 percent.
(Additional reporting by John Acher and Ole Mikkelsen in Copenhagen)
(Editing by Diane Craft and Lincoln Feast)