Dupont to Acquire Danisco

January 10/Wilmington, Del./Bloomberg News -- DuPont Co. agreed to acquire Danisco A/S for $5.8 billion, beating approaches from rival suitors for the Danish maker of enzymes used in food and biofuels.

DuPont will pay 665 kroner ($115) a share, the Wilmington, Del.-based company said in a statement -- 25% more than Danisco’s 530-krone January 7 closing share price. DuPont will also assume $500 million of debt.

Chief executive officer Ellen Kullman pounced on Danisco five months after it lifted a cap on shareholder voting rights, seeing a chance to expand in biofuels amid a paucity of takeover targets. Danisco chairman Jorgen Tandrup said in an interview that there were a few bidders that “right to the final moment” were competing to make the best offer.

“It’s a good deal for DuPont, and with a 25% premium to the share price, it’s also a good deal for Danisco shareholders,” said Jens Houe Thomsen, an analyst at Jyske Bank in Silkeborg, Denmark. “Danisco has the world’s second-best biofuels business and a strong cooperation with DuPont already.”

Under chief executive officer Tom Knutzen, Danisco has given investors a total return of 53% over the past 12 months, prior to today, the second-biggest gain on the Bloomberg Europe Food Index. The stock jumped as much as 27% to 670.50 kronor, the highest price since the stock began trading in Copenhagen in December 1989.

Good Fit
The enzyme market is “very attractive,” as makers of detergents, animal feed and food are also turning to bacteria and catalysts to improve yields and counter input costs, Houe Thomsen said.

Danisco selected DuPont from potential suitors as it provided the best fit and price, Tandrup said.

“We’ve had a few bidders interested,” he said, declining to give details. “The fit between DuPont and Danisco is very good.”

Kullman is diversifying DuPont away from stalwarts such as Kevlar bullet-resistant fabric and titanium dioxide pigment used in paint. Danisco is among the world’s largest food-ingredients makers, producing sweeteners and cultures used in ice cream and cheese. Both companies already share an ethanol-producing venture.

Biofuel Partnership
“We already know how to work together productively,” Kullman said today on a conference call with analysts. “They have been our trusted partners in biofuels and biomaterials.”

DuPont will realize $130 million in annual cost savings from the combination by 2013, chief financial officer Nicholas Fanandakis said on the call. DuPont’s debt may be downgraded one notch at most, he said.

Danisco, which once produced the liquor schnapps, will be the largest takeover by DuPont since it bought genetically modified seed-maker Pioneer Hi-Bred International Inc. for $7.7 billion in 1999. There were $84.8 billion of chemical-company takeovers announced in the past year, with an average premium of 26%, according to data compiled by Bloomberg.

The U.S. company will use $3 billion of cash and use debt to finance the rest of the deal. The acquisition should close early in the second quarter and add to earnings starting in 2012, DuPont said.

Hurdle Removed
DuPont is paying about 23 times Danisco’s earnings per share in the year through April, according the average profit estimates of analysts surveyed by Bloomberg. Competitor Kerry Group Plc, based in Tralee, Ireland, trades at about 14 times estimated earnings; Associated British Foods Plc, in London, trades at 15 times; and Christian Hansen Holding A/S, based in Hoersholm, Denmark, is valued at 21 times.

Danisco’s shareholders in August approved the board’s proposal to remove a restriction that limited the number of votes a single shareholder could have to no more than the equivalent of 7.5% of the share capital, regardless of the holder’s stake.

“Without the removal of the voting rights cap DuPont wouldn’t have made this offer,” Houe Thomsen said.

From the January 10, 2011, Prepared Foods E-dition