2011 seems to be starting with a big bang for industrial biotech after hearing two acquisitions activities worth billions of dollars within a month.
After DSM’s announcement of its $1.09bn acquisition of Martek late December, DuPont announced yesterday its $6.3bn acquisition of food ingredients company Danisco, which has big enzymes and burgeoning biofuels/biomaterials businesses. Many analysts were surprised with the acquisition and a bit concerned with the huge DuPont money involved, which will include $5.8bn paid in cash and assumption of $500m of Danisco’s net debt.
The acquisition was expected to be financed with about $3bn in existing cash and the remainder in debt.
DuPont officials during a conference call yesterday, however, were very enthusiastic in what they call as the creation of a global industrial biotech and ag leader. DuPont pointed out that both companies have a combined industrial biotech revenues of around $1bn in 2010. Danisco’s enzymes business under Genencor had 2010 revenue of $860m and accounts for 33% of Danisco’s total revenues.
The global industrial enzymes market is noted by DuPont at around $2.7bn. Enzymes is Danisco’s most highly research-intensive business and the company reportedly spends around 6.5% of sales on R&D. DuPont expects to achieve some synergies by rationalizing redundant R&D infrastructure but the enzymes business will still remain R&D intensive compared to DuPont’s current consolidated R&D spend at around 4.5-5% of sales.
Aside from accelerating growth through Danisco’s enzyme capabilities, other long-term revenue synergies include opportunities to introduced bio-based alternatives for DuPont’s industrial chemical and material products, and development of new biomaterial building blocks.
The blog notes Danisco’s Genencor is currently developing bio-isoprene (and other bio-isoprene derived chemicals) and has a bio-isoprene project with Goodyear. In the biofuels area, Danisco currently has its cellulosic ethanol JV with DuPont. Both DuPont and Genencor also had a history in the development of bio-propanediol (PDO), which is now produced and marketd by DuPont Tate & Lyle Bio Products, LLC in Loudon, Tennessee.
With this kind of acquisition, as the blog said, good times ahead for industrial biotechnology.