DuPont buy Danisco $ 5.8 billion in food sector

DuPont to buy Danisco for $ 5.8 billion in food sector

3:00 PM, 8th June 2011
DuPont to buy Danisco for $ 5.8 billion in food sector

NEW YORK, US: DuPont recently said that 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 bio ethanol.


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. “The board of directors of Danisco has unanimously resolved that it intends to recommend that shareholders accept the offer,” Danisco said in a statement.


Traditionally, DuPont has focused on chemicals and safety & 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. The Danisco acquisition would be the first major deal for Ellen Kullman, CEO 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 US 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.

© Reuters




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