DuPont to purchase Danisco for $5.8 billion
Monday January 10, 2011, 1:06 pm EST
DuPont to buy Danisco for $5.8B as it looks to broaden food and biofuels operations
WILMINGTON, Del. (AP) -- DuPont is buying Danish food additives maker Danisco A/S for $5.8 billion as it looks to beef up the products it offers to improve the taste and health benefits of food.
The chemical giant wants to widen its reach as the world's population grows and demand for food increases. The deal also gives DuPont more exposure to alternative fuel markets, like ethanol, where Danisco products are also used.
Danisco's compounds are used in a wide range of industries from bakery, dairy and beverages to animal feed, laundry detergents and bioethanol. Its food additives include enzymes that make low-fat food taste better or extend shelf life, cultures like probiotics for yogurt and sweeteners. DuPont will also use Danisco additives in its lucrative seed business, which helps farmers produce bigger crops of staples like soybeans and corn. Corn is also used in the production of ethanol.
DuPont said in a conference call Monday that Danisco is key to its dominance in the race to produce more and better food. It said Danisco has a strong presence in developing nations where population is expected to grow the most in coming years.
E.I. DuPont de Nemours & Co., founded in 1802, has been diversifying its business in recent years. Around 30 percent, or $9 billion, of 2010 sales were projected to come from products introduced in just the last four years.
DuPont has been helped by growing demand for its agricultural products and the improving global economy, particularly in Asia. DuPont also makes chemicals used in electronics, autos and other industries.
Danisco, which already has a partnership with DuPont to develop ethanol technology, said Monday that it will recommend shareholders accept the deal. The acquisition includes the assumption of $500 million in debt.
Danisco has about 7,000 employees.
Danisco Chairman Joergen Tandrup said that there were several bidders for the company, with DuPont coming out ahead late Sunday night. He doesn't see any problems in getting the deal approved. DuPont expects to get approval from Danish authorities in the next two weeks. The company expects the deal to officially close in about four months.
The acquisition will be made through a public tender offer by a DuPont subsidiary at 665 Danish kroner ($115.25) per Danisco share.
The acquisition is expected to lower DuPont's 2011 earnings by 30 to 45 cents per share, but it should boost earnings within a year after closing, DuPont said. The company currently projects earnings of $3.30 to $3.60 for the year.
It will pay for the acquisition with about $3 billion in cash and the rest in debt.
DuPont shares fell about 4 percent in midday trading Monday.
Source: Associated Press
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