European bakery supplier CSM has sold the customer base for its US gluconic acid business, a move due to be followed by the imminent shutdown of its production facility.
The transaction, effective as of Friday, involves the sale of the gluconic acid, sodium gluconate and glucona delta lactone operations of the firm's Purac America subsidiary.
The small-scale business, which had sales of $5.7m in 2006, was sold to Fuso Chemical for $2.5m, excluding inventories. Fuso, which has operations in Japan, China and the US, produces malic acid, citric acid, gluconic acid and sodium glucontate.
In a statement released today, CSM said the transaction does not include the transfer of employees, nor of Purac America's Janesville, Wisconsin factory, which is due to be closed down "in the short term".
Further details of the sale were not disclosed, and neither CSM nor Purac America were available to comment on the move.
Gluconic acid is an acidulant prepared by the fermentation of dextrose. In food products, gluconic acid derivatives are mainly used for calcium and mineral enrichment due to their chelating properties.
Gluconic acid and its derivatives make up a major segment of Purac's business. Other principal products manufactured by the Netherlands-based firm include lactic acid and its derivatives, as well as lactic acid-based biomaterials and lactitol.
But the firm has been hit by rising costs, which last year prompted a hike in its selling prices for lactic acid, lactates, gluconic acid, gluconates and lactitol.
The company said that the increases would vary from between five and ten percent depending upon product category, and could vary from region to region.
Purac produces most of its basic products by fermentation on basis of carbohydrates obtained from sugar cane, sugar beet, corn and wheat.
The company said that production costs had increased substantially due to higher costs for carbohydrates and energy.
CSM has a strong presence in the US bakery ingredients market, primarily through its subsidiaries Caravan Ingredients (CI), BakeMark and Brill. However, today's announcement follows a string of earlier divestitures in the field.
In 2005, the European firm shut down four of its bakery ingredients distribution units in the US, resulting in savings of about $78m.
Other structural changes announced recently by CSM in its US operations include the merger of its Caravan Products and American Ingredients Company (AIC) to form a single operating entity.
The move, which marked another step in the firm's mission to cut costs and achieve better operational focus, was expected to result in further savings and an even more focused and competitive company.
In January this year, CSM expanded its US bakery business with the acquisition of Archer Daniels Midland's (ADM) North American bakery ingredients division. The Dutch firm acquired ADM's Arkady business for $55m.
The company claims to currently hold second place in the North American bakery ingredients market, occupying a 7 percent share of the total $21bn market.