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M&A round-up: July/August

14-Aug-2008

The summer season is traditionally not a time when much ink gets spread along the dotted line. But that hasn’t stopped the rumour mill working over time, with reports that Danisco may receive a bid from Apax and speculation over potential buyers of National Starch Food Innovation.

In mid July the Danish pink sheets reported that private equity firm Apax was interested in acquiring ingredients firm Danisco. Neither company has made any comment – beyond Danisco CEO Tom Knutsen pointing out that any bid received would have to be announced to shareholders.

However analysts have pointed out that the Danish press was correct in its reporting that Nordzucker and Tereos were bidding for Danisco’s sugar business – just weeks before a final deal with Nordzucker was struck.

Moreover, following the divestment of its sugar operations and a reorganisation of ingredients, Danisco is seen to be in fit shape for private equity interest.

Meanwhile, speculation is growing about potential buyers for National Starch Food Innovation with ADM emerging as a likely contender, according to one industry analyst from Frost & Sullivan.

A sale is expected before the end of the year and National Starch is likely to be snapped up by a market leader, said Chandrasekhar Shankaar, research analyst, foods and beverage ingredients practice at Frost & Sullivan.

Such a move could then increase the bargaining power of starch manufacturers struggling with increasing raw material costs, he added.

But rumours aside, there have been two solid announcements of planned acquisitions.

South African food firm Tiger Brands is to acquire Chococam, the last of Barry Callebaut’s consumer businesses in Africa.

While the price tag for Cameroon-based Chococam remains undisclosed, the deal sees Tiger Brands acquiring a 74.7 per cent slice of the shares, while the remaining 25.3 per cent will stay with small private shareholders.

The divestment of Chococam, with annual sales of about €28 million, follows the disposal of other consumer businesses in Senegal and Ivory Coast by Barry Callebaut, the world's number one maker of bulk chocolate, to focus on contract manufacturing and producing ingredients such as cocoa butter.

FMC Corporation has strengthened its hold in the hydrocolloid market by entering into an agreement to acquire CoLiving Food Ingredients, based in Guangzhou, China to serve the rapidly growing dairy market there.

The company said the acquisition will enhance FMC’s leadership position in supplying specialty hydrocolloid products and services to the rapidly growing food ingredient market in China. It is expected that the transaction will close within four to six weeks following approval from Chinese regulatory authorities.

CoLiving will be integrated into FMC Specialty Chemical Group’s BioPolymer division, which recently opened a new technology and commercial center in Shanghai. Following the acquisition, FMC will add specialty blending capabilities and an application laboratory in Guangzhou.

Finally, the sale of Tate & Lyle’s international sugar trading business to US oilseed firm Bunge is now unconditional, removing the UK sweetener group from the volatile sugar market.

The deal was first announced at the start of July, following the recent sale of Tate & Lyle sugar businesses in America, which saw a reduction in the need for its physical trade operation.

The working capital in the business will remain with Tate & Lyle until March 31, 2009, at which point, on the deal closing, it will be assumed by Bunge.

The deal reflects the company’s move away from being a commodity processor and trader to focusing more on higher value products.

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