The Danish food ingredients and enzymes company Danisco is set to be acquired by US chemicals giant DuPont in a £3.7 billion ($5.8 billion) deal. The deal will give DuPont clear lead in the fast growing food ingredients business, the company said in an announcement on Sunday.
The food additives business has been traditionally dominated by a much smaller rival – International Flavors and Fragrances and the all cash deal will give DuPont entry in the niche segment.
However, the acquisition will be dilutive for DuPont in 2011 and its Earning Per Share (EPS) will drop from $3.60 to $3.30, a fall of 30 Cents per share. The company expects the fall in EPS between 30 and 45 Cents range.
DuPont will make an open offer to the shareholders at a cash offer price of 665 DKK, which Danisco is expected to recommend. Shares of Danisco had closed at 530 DKK on Friday, making the offer a 25 percent premium over its Friday close.
However, DuPont slipped by 22 Cents to $49.76 on Friday. DuPont’s market capitalization stands at $45 billion, as on Friday.
DuPont is known worldwide for its chemical and safety equipments like the bulletproof Kevlar Jacket and Tyvek homewrap.
However, DuPont had acquired Pioneer – a seed manufacturing company in 1999 for $7.7 billion in an apparent shift of focus towards food and nutrition.
Danisco acquisition will be the first major deal in two years by the current CEO Ellen Kullman since she took over in 2008.
DuPont had already tied up with Danisco to develop cellulose based ethanol technology.
DuPont will fund the deal with internal cash accruals of around $3 billion and remaining through external debts. DuPont will takeover the $500 million debts on Danisco’s books.
The deal should be closed by the second quarter of 2011 and DuPont estimates that EPS will turn accretive from 2012 onwards. Danisco has already posted a higher than expected profit for the second quarter in 2010.