DSM sells off sodium benzoate in strategy shift

By Laura Crowley

- Last updated on GMT

Related tags Investment Dsm

Dutch DSM will sell its Special Products unit as it shifts its
focus to fast growth and high margins by concentrating on
nutritional ingredients and high performance materials.

This is the company's first divestment as part of its Vision 2010 strategy, and the sector will be bought by chemicals company Arsenal Capital Partners, based in New York. DSM will benefit with a net book profit after tax of just over €10m from the sale. In divesting the Special Products division, DSM will cease production of lines such as Purox, which comprises two important ingredients used as in food as well as a range of industrial applications, although more of its ingredients. Purox S - sodium benzoate - is used in soft drink or beverages low in alcohol content, and jams and marmalades as a preservative Purox B - benzoic acid - is used in bakery applications for controlling microbial growth in non-yeast raised bakery products, as well as acting as a preservative in fish products. Vision 2010 strategy ​ DSM's strategy will see it transformed into a Life Sciences (nutrition and pharmaceutics) and Material Sciences (performance materials) company, aiming to create innovative products and services that support a healthier and more sustainable way of life. "We are very unique in having this synergy between life sciences and material sciences and we are focusing on these areas as we consider these to have the biggest growth potential,"​ Nelleke Barning, corporate communications, told FoodNavigator.com. "Special Products did not fit with this strategy." ​Last year the company launched a profit improvement programme for DSM Nutritional Products, in line with its new focus. Mid 2007 DSM announced it would be carving out and divesting a number of businesses that do not fit in the accelerated strategy, and at the same time it would search for acquisitions in its core business areas, to increase output for nutritional applications. Market-driven growth and innovation, increased presence in emerging economies and operational excellence remain are the drivers for DSM's strategy. In 2007, it announced new investments would also contribute to the growth of this newly focused area. It acquired Pamako Engineering and Pentapharm Holding as well as launching a large number of new products and applications, amounting sales of more than €350m. Special Products ​In 2007, this business area achieved sales of €101m, with a slight operating profit. It supplies a wide range of markets, including carbonated soft drinks and flavours and fragrances. "We are very pleased with the result of this first sale in the divestment programme of our acceleratedVision 2010 strategy,"​ said Jan Zuidam, deputy chairman of DSM managing board. "I am convinced that the business will continue to prosper under new ownership with which there is a better strategic fit."​ DSM's Special Products unit employed 126 people in the Netherlands, all of whom will transfer to the new owner. The two companies insist production will continue for all goods and there will be a smooth transition for customers. ​John Televantos, principal at Arsenal Capital, said: "This acquisition of DSM Special Products is an excellent fit with our investment strategy in the Specialty Chemicals sector to acquire mid-size, niche market leaders in higher growth sectors that are supported by strong management teams. "The acquisition will provide an excellent platform for growth through future investments planned for theRotterdamsite including a new manufacturing facility for di-benzoate esters and incremental capacity improvements to ensure our customers will have reliable supply of high quality products to meet their growing future needs."

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