12 January 2011 16:07 [Source: ICIS news]
By Nigel Davis
The bid, welcomed as a good fit – and a good price – by Danisco management, puts DuPont in an extremely strong position as it strives to develop the enzymes that will create second-generation biofuels as well as other bio-based products. The leader in this race is said to be the closely held Danish group Novozymes.
Also this week, the agreements signed by INEOS with oil giant PetroChina and that company’s parent, China National Petroleum Corporation (CNPC), pave the way for deals in
For DuPont, the Danisco bid – the company’s first major acquisition since it bought the Pioneer seeds business for $7.7bn in 1999 – opens up more “megatrend” business opportunities.
Danisco makes food enzymes, and its subsidiary, Genencor, has been a partner with DuPont in bio-propanediol (bio-PDO) and cellulosic ethanol production.
The company’s extensive enzyme expertise will be particularly important to DuPont as the
The acquisition will give DuPont more firepower in emerging “megatrend” markets. “Specifically, we are well aligned with these megatrends in the area of increasing the quantity and quality of food and decreasing dependency on fossil fuels, and protecting people in the environment,” DuPont CEO Ellen Kullman said on 10 January. She added that most of this growth will occur in developing markets.
For DuPont, Danisco brings market access and technology. The industrial enzyme business will enhance DuPont's bioscience businesses and could provide alternative production pathways to products such as fuel ethanol, bioplastics and bio-based elastomers. Genencor has worked on the development of a bio-based route to isoprene with Goodyear. The tyre maker believes the bio-isoprene market could be significant within a few years.
At the technical level, Danisco's enzyme and fermentation know-how fits with DuPont’s strengths in biomass processing and microbe engineering, and is complemented by its global reach, DuPont says.
The acquisition adds important pieces to the jigsaw puzzle that takes DuPont capabilities from crop seeds and traits through bio-processing to global markets as diverse as materials, fuels and food. The combined companies industrial biotechnology revenues would have been $1bn in 2010, DuPont says.
Some analysts rate the deal highly, although DuPont’s share price has suffered largely because of the expected short-term dilution to earnings in 2011. DuPont is set to pay an earnings before interest and tax (EBIT) multiple of 15.2 times for the business.
The financial implications of the agreements with PetroChina and CNPC signed by INEOS on 10 January are not yet known, but PetroChina is expected to acquire a 50% stake in the petrochemical firm's two refineries: Grangemouth in the UK and Lavera in France.
Importantly for INEOS, the deals give the company opportunities to licence more technology in
“This is very much the start of much closer cooperation,” INEOS director, Tom Crotty, said on 10 January.
INEOS wants to do more business in
Both deals give a lift to a year in which a resurgence of M&A activity is expected. There is pent-up demand for deals from both buyers and sellers who have been constrained by financial and market uncertainty but are, at the start of 2011, much better placed.
While deal multiples are rising, this is an M&A market not skewed heavily to buyers or sellers, but one that is conducive to deal making, the experts believe.
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