Danisco übernimmt von Rhodia den Bereich Food Ingredients
Danisco strengthens its global market position
Today [2004-03-11] Danisco takes a major step towards realising its goal of being the leading supplier of ingredients to the food industry.
´The acquisition of Rhodia food ingredients activities within texturants and speciality products will consolidate our position as the preferred partner to the food industry, and will create considerable value for our shareholders,´ says Alf Duch-Pedersen, CEO of Danisco.
Danisco acquires Rhodia food ingredients activities within texturants and speciality products with total sales of DKK 1,575 million (EUR 211 million), EBITDA of DKK 235 million (EUR 31 million) and EBITA of DKK 150 million (EUR 20 million) (on a pro forma basis) in the financial year 2003.
The total acquisition price is approximately DKK 2,400 million (EUR 320 million) with expected completion in May 2004 following the approval of the competition authorities.
Danisco expects to realise cost synergies of at least DKK 120 million (EUR 16 million) over a three-year period from completion. These synergies only relate to the realisation of cost synergies. Substantial additional synergies, not included in this estimate, are expected to arise from better utilisation of the sales force and the increased access to a broader customer base.
Based on the estimated cost synergies alone, the acquisition is expected to meet Danisco´s requirement for a return on invested capital exceeding the weighted capital cost of 7.5% in the third full financial year after the acquisition.
Danisco will finance the acquisition through its existing bank and credit facilities.
The acquisition does not affect Danisco´s dividend policy, whereby Danisco´s shareholders may expect a payout that corresponds to consolidated net profit for the year in the form of dividends and share buybacks.
Upon completion in the first quarter of 2004/05, a provision will be made for restructuring costs. The restructuring costs are not expected to exceed one year´s cost synergies.
Danisco develops and produces food ingredients, sweeteners and sugar. The group employs approx. 8,000 people in some 40 countries and reported net sales of DKK 16.6 billion in 2002/03. Danisco´s broad product portfolio includes emulsifiers, stabilisers, flavours, cultures and sweeteners such as xylitol and fructose. The majority of these ingredients are produced from natural raw materials and contribute, for instance, to improving the texture in bread, ice cream, yoghurt and other foods. Danisco is also one of the largest and most efficient sugar producers in Europe.
Danisco strengthens its position as "one-stop-supplier"
Danisco is committed to being the preferred partner to the food producers. Danisco´s strategy is to provide the food producers with knowledge and quality ingredients and solutions throughout the food production process - from the idea inception until the consumer can enjoy the product. Our customers only need to make one stop to exchange ideas about new food products and knowledge about food ingredients.
Danisco´s role as a knowledge centre for food ingredients and food applications is summed up in our slogan: ´First you add knowledge…´ Rhodia food ingredients´ knowledge about products and applications will be a major contributor to Danisco´s existing knowledge base.
The strategic rationale
Through the acquisition of Rhodia food ingredients activities, Danisco will considerably expand its product platform - notably in speciality and texturant products.
Rhodia food ingredients´ high-profile products will be able to leverage Danisco´s strong global sales network. The acquisition substantially enhances Danisco´s product palette within speciality and texturant products (see attached product overview).
In the cultures market, Rhodia food ingredients is a supplier of products with technological benefits in terms of taste and texture, as well as a world-leading producer of probiotic products.
Danisco will be taking over production in several countries, which will provide for production plant efficiencies.
Danisco expects that loss of sales through the combination of the businesses will be limited. Cost synergies are expected to aggregate DKK 120 million, and to have full effect in the third financial year after the acquisition.
´The challenging market conditions have opened up for structural changes in the food ingredients market. We believe that with the acquisition of Rhodia´s activities and highly qualified staff we are prepared to leverage the recovery when it materialises. This applies to all links in the value chain from idea development to production and distribution,´ says CEO of Danisco Alf Duch-Pedersen.
Products
The acquisition of Rhodia food ingredients activities will also strengthen Danisco´s texturant and speciality products platform and will allow Danisco to further gear the sales force, which will enhance our strong position as the preferred ingredients supplier to the food industry. Danisco will increase its exposure to some of the fastest growing markets for food ingredients, ensuring the strategic foundation for achieving organic growth rates in excess of the food ingredients industry in general.
Texturant products
Danisco will gain access to new products in the business area of stabilisers, primarily xanthan production. Rhodia food ingredients today enjoys a leading market position as producer of xanthan. In 2003, Danisco announced its participation in a joint venture in China for the purpose of building up the production of xanthan. Adding Rhodia food ingredients´ xanthan production will not have any immediate impact on the plans but the contribution of Rhodia food ingredients´ knowledge in this area will optimise the investment in China.
Activities within functional systems, guar gum and locust bean gum will also be added.
Speciality products
With the Rhodia food ingredients acquisition, Danisco will become one of the world leaders in the production, sale and development of cultures. Danisco will gain access to new customer segments and technologies that will considerably expand the product palette. The patented product portfolio will be significantly enlarged.
Food safety is an important business area in which Rhodia food ingredients has developed bio-products that prolong the lifetime and reduce the amount of tainted food (Microgard). Rhodia has also developed culture products such as Stargard, which prevents salmonella infections in meat and chicken. Avgard is another food safety product, which prevents Listeria.
In the area of bio-preservation Rhodia food ingredients will supplement Danisco´s sales of Natamax™ and Nisaplin®. This will secure a significant number of new customers and technologies, further strengthening Danisco´s leading position in antimicrobials.
The acquisition will also add dairy enzyme production, and Rhodia food ingredients´ products will therefore help Danisco access the dairy market and other markets.
Geographic exposure
The acquisition of Rhodia food ingredients will mainly increase Danisco´s sales in North America and continental Europe, primarily in France.
Price and financing
The total acquisition price of approximately DKK 2,400 million or EUR 320 million reflects an Enterprise Value (EV) to EBITDA multiple on last year´s earnings above 10 before recognition of any cost synergies. We expect the investment to meet our financial target of achieving of positive EVA (economic value added) after three years´ ownership. This calculation is based on a WACC of 7.5%, and only includes cost synergies of DKK 120 million. In addition, we estimate that there is a potential for realising considerable sales synergies.
The acquisition will not affect Danisco´s stated dividend policy of paying out to its shareholders consolidated net profit for the financial year in the form of dividends and share buybacks.
Attachment
The table below illustrates how the acquisition of Rhodia food ingredients activities will enhance Danisco´s product palette and market positions.
| Emulsi-fiers | Functional Systems | Stabi- lisers | Flav-ours | Food- Enzymes | Cultures | Bio- preser-vation | Sweete- ners | |
| Distribution by product | ||||||||
| Danisco | x | x | x | x | x | x | x | x |
| Acquired from Rhodia food ingredients | - | x | x | - | x | x | x | - |
| Global market position | ||||||||
| Danisco before the acquisition | 1 | 1 | 2 | 8 | - | 4 | 1 | 1 |
| Danisco after the acquisition | 1 | 1 | 2 | 8 | 3-4 | 2 | 1 | 1 |
Products
Functional systems are tailor-made blends of emulsifiers and stabilisers, which provide a specific functionality in the food product and/or the production process. By using functional systems the customer can for example minimise the amount of ingredients kept in stock and minimise the risk of faulty blends. Using functional systems also reduces the number of ingredients in the production process that are subject to quality assurance. Functional systems are used in many products such as ice cream, bread, recombined milk and yoghurt.
Stabilisers are thickening or gelling agents that can bind and control the water content in foods, thereby affecting the mouthfeel of the product. Stabilisers are used in beverages, fruit processing and confectionery. The adding of xanthan will improve Danisco´s market position for applications to for example salad dressings.
Food enzymes are catalysts of a natural chemical process. They are used in the bakery industry where they improve the life and volume of the end product. They also improve the production process for enzymes and minimise the risk of faults.
Cultures ensure the fermentation process, providing the characteristic taste and texture to products such as cheese and yoghurt. Cultures also have a probiotic effect, which benefits the digestive and immune systems. Danisco´s market position in the dairy industry will be considerably strengthened by Rhodia food ingredients´ strong product portfolio.
Bio-preservation ensures the biological safety of food products and are found in cheese, desserts, meat, juice and partly baked products. Danisco will have a much stronger position in the meat industry with the acquisition of Rhodia food ingredients´ products.
Danisco´s acquisition of Rhodia food ingredients increases its exposure to some of the fastest growing markets for food ingredients. The acquisition contributes to Danisco´s strategic target of growing by 30-50% above the general food ingredient market growth.
Quelle: Kopenhagen [ danisco ]
