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DSM eyes more buys (probiotics, herbals?) as it seeks complete nutrition portfolio

By Shane Starling in Basel, Switzerland , 27-Sep-2012
Last updated the 01-Oct-2012 at 17:39 GMT

Growth in DSM’s human and animal nutrition cluster is set to continue after the company this morning indicated an ongoing commitment to broadening its portfolio and did not rule out probiotic and/or botanical acquisitions.

CEO and chairman of the managing board, Feike Sijbesma, emphasised portfolio and geographic expansion while noting, “nutrition is the major part of our (€9bn) business at 4.4bn”.

Speaking at the annual Capital Markets Days event at DSM Nutritional Products base in Basel, Switzerland, other nutrition chiefs talked of the company’s ongoing interest in a complete nutrient portfolio, even as its current range is the world’s most extensive.

“Probiotics is an interesting space”

The company has agreed to take on Cargill’s cultures business under DSM Food Specialties, but acknowledged interest in bolstering its pure probiotic presence, not to mention botanicals.

“Probiotics is an interesting space – we see a lot of interest outside of North America where we have our Culturelle dietary supplements business,” said Rick Greubel, president of Human Nutrition and Health.

“We see it expanding in Asia and here in Europe so we are looking at ways to expand not only the Culurelle business globally but we are also looking at probiotics as a space in general.”

If the price is right…

DSM’s interest in acquiring Danish probiotics giant Danisco was no secret, although it pulled out as acquisition earnings-profit ratios spiralled up to 14.9 as DuPont eventually shelled out about €4.5bn for the firm at the backend of 2010.

Chief financial officer, Rolf-Dieter Schwalb, said the company was always on the look out for acquisitions particularly in nutrition, performance materials and innovation, but was not going to pay above self-imposed established limits and financial benchmarks.

“It is public knowledge we had interest in Danisco and Provimi but if the price is too high we walk away,” Schwalb said.

He noted its recent omega-3 acquisitions (Martek for €730m and Ocean Nutrition Canada for €420m) that had given it instant market leadership in that space had come at EBITDA earnings-price ratios of 7.3 for Martek and 9 for ONC. Its recent animal nutrition buy – Tortuga – had a ratio of 7.8.

By the company’s own evaluation equations which take account of integration synergies, long term earnings projections and other factors, Martek was worth €1.4bn, ONC €850m.

Bolstering botanicals?

Board member Stephan Tanda emphasised that the company remained true to its cautious Dutch investment roots, but acknowledged botanicals was another area that could see more action from the company.

“Natural ingredients is an area that interests us. We have some natural ingredients in our portfolio and we have made acquisitions like the natural carotenoid player Vitatene, and Microbia,” Tanda observed.

“Certainly that is an area that if the right acquisition comes along we will take a serious look at it.”

Tanda rejected the idea that there would be acquisition bargains to be had due to the global economic recession, as, “most companies in the high-quality nutrient area were not really available for a bargain.”

DSM estimates EBITDA profit for 2013 of €1.4bn although most analysts are forecasting €1.3bn.

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