Danish food ingredients company Danisco
DuPont announced its planned acquisition of Danisco on Sunday, aiming to diversify its earnings portfolio to be less dependent on chemicals. Once the deal closes, nearly half of DuPont's revenue would come from food-related products.
Danisco Chairman Jorgen Tandrup said he would be surprised if a rival bidder emerged, adding he did not expect any antitrust problems. DuPont offered 665 crowns ($115) per share for Danisco, a 25 percent premium.
There has been a process where several contenders have been involved, and in the final round here there was still competition for the company, and last night we had the winner, Tandrup said. He declined to name the other bidders.
Danisco shares rose as high as 670.50 crowns early on Monday, above DuPont's cash bid, but then fell back to 660 crowns. Shares in Danish rivals such as Novozymes A/S
DuPont said its bid values Danisco at 12.8 times Danisco's earnings before interest, depreciation and amortization. Analysts put the valuation at around 11 times EBITDA, about where the highly rated consumer goods company Reckitt Benckiser
The bid shows how valuable these food ingredient companies are, with the bid multiple being similar to the value that Reckitt Benckiser shares trade on currently, said Investec Securities analyst Martin Deboo in London.
The deal will increase DuPont's revenue from the economically more stable food sector and boost its position in cellulosic ethanol, an alternative fuel currently supported by a tax credit in the United States. The companies have a joint venture in cellulosic ethanol.
This is part of a whole trend toward industrial biotechnology, said Pieter Busscher, a portfolio manager at SAM Smart Materials Fun, the 13th-largest investor in Danisco. To us, the bid seems reasonable. Novozymes
Danisco's mix of food ingredients such as emulsifiers, gums and natural sweeteners, and its industrial enzymes, which are used in biofuels, drew the attention of DuPont CEO Ellen Kullman, who called Danisco a premium entity.
The combination of DuPont and Danisco will further establish us as a global leader in biotechnology, Kullman said on a conference call. This is a very attractive transaction from a financial point of view.
DuPont is paying $5.8 billion cash and assuming $500 million of Danisco debt. DuPont will use $3 billion in existing cash to pay for the deal, and raise the rest in debt.
DuPont said it expects the deal to cut its 2011 earnings per share by 30 cents to 45 cents. Before the deal, it forecast 2011 earnings of $3.30 to $3.60 per share.
The immediate dent to earnings did not bother analysts, who have been looking for a long-term shake-up in DuPont's business plan for some time.
I think the price appears to be fair, Soleil Securities analyst Mark Gulley said.
DuPont shares fell 3.5 percent to $48.03 in morning trading.
($1 = 5.76 Denmark Kroners, DKK)
(Additional reporting by Ole Mikkelsen in Copenhagen, Megan Davies in New York, and Quentin Webb, Cecilia Valente and David Jones in London; Editing by Sophie Walker and John Wallace)