Rhodia deal gives Danisco stronger market position for cultures and enzymes

Related tags Danisco E number

Danish ingredients firm Danisco shoots into the number two cultures
spot after signing a deal worth €320 million yesterday to buy the
food ingredients arm of struggling French chemical firm Rhodia.

Slated for completion in May this year, the agreement strengthens Danisco's platform in texturants and speciality products giving it stronger market positions in cultures and food enzymes as well as boosting sales in North America and Europe.

"We'll gain the top position in cultures and a leading position in hydrocolloids,"​ a spokesperson for Danisco recently told FoodNavigator.com.

Stabilisers is a key growth area for Danisco, currently in the number two slot behind CP Kelco, with the company late last year announcing a new joint venture for xanthan gum in the burgeoning emerging market of China. Building on the one-stop-supplier philosophy, Danisco linked up with one of the largest xanthan gum suppliers in China, the Henan Tianguan group.

Rhodia's slice of the hydrocolloid market - xanthan gum, guar gum and locust bean gum - should re-enforce the company's ambitions in the emerging market of China. 'Danisco will gain access to new products in the business area of stabilisers, primarily xanthan production. Adding Rhodia food ingredients' xanthan production will not have any immediate impact on the plans but the contribution of Rhodia food ingredients' knowledge in this area will optimise the investment in China,'​ said Danisco in a statement this week.

As the number one supplier of probiotics to supplements the Rhodia acquisition shoots Danisco into the number two slot, behind Chr Hansen, for cultures that includes bioproducts and food protection. "By acquiring Rhodia's ingredients arm we achieve a critical mass on cultures in the marketplace,"​said the company.

Under the speciality products range Rhodia developed bio-products that prolong the lifetime and reduce the amount of tainted food (Microgard) as well as culture products such as Stargard, which prevents salmonella infections in meat and chicken. Avgard is another food safety product, which prevents Listeria.

In the area of bio-preservation the french firm will supplement Danisco's sales of Natamax and Nisaplin. This will secure a significant number of new customers and technologies, further strengthening Danisco's leading position in antimicrobials, said the Danish company.

In addition, the deal , financed through its existing bank and credit facilities, adds dairy enzyme production to the Danisco stable, providing it with quick access to the dairy market.

In recent years the market has put pressure on Danisco to hit the acquisition trail in light of imminent reform to the European sugar regime that is slated to slash the bottom line of the company - a leading sugar producer - by as much as 40 per cent. Investment bank Goldman Sachs estimates that the Danish firm has a cash pile of €800million to spend on new purchases. At €320 million the Rhodia deal leaves the group wih sufficient funds in the war chest.

Danisco said it expects the deal, that concerns 800 jobs, to realise cost synergies of at least DKK 120 million (€16 million) over a three-year period from completion of the deal. Not included in the estimate, continued the group, are other synergies and anticipated savings such as the better utilisation of the sales force and the increased access to a broader customer base.

In 2003 Rhodia food ingredients activities within texturants and speciality products produced total sales of €211 million, EBITDA of €31 million) and EBITA of €20 million. At the end of last year the struggling French firm - which posted a first-half loss of €150 million for 2003 - committed to sell €700 million worth of non-core assets by the end of 2004. With the additives alone, it would achieve 30 to 40 per cent of this target. In January this year Rhodia, also believed to be looking to shed its core silicones division and parts of its phosphates branch, announced a round of 572 job cuts at its French operations.

Rhodia's Chief Executive Jean-Pierre Clamadieu said in a statement this week that the sale 'was an important step in Rhodia's recovery plan and will contribute significantly to the reduction of group debt.

Related topics Cereals and bakery preparations

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