DuPont to buy Danish biotech firm for $5.8 billion
DuPont Co., in its biggest acquisition since the purchase of seed company Pioneer Hi-Bred International Inc. in the late 1990s, has agreed to pay $5.8 billion for Danisco, a Danish company that makes enzymes used to produce chemicals and fuels from plants.
DuPont Co., in its biggest acquisition since the purchase of seed company Pioneer Hi-Bred International Inc. in the late 1990s, has agreed to pay $5.8 billion for Danisco, a Danish company that makes enzymes used to produce chemicals and fuels from plants.
The deal for Danisco, a partner in DuPont's fledgling effort in Tennessee to produce ethanol from corncobs, is designed to accelerate the Wilmington company's gradual shift in raw materials - under way for more than a decade - from fossil fuels to renewable resources.
"Conceptually, this parallels the beginnings of the petroleum-refining industry 150 years ago, which took a low-valued input called crude oil" and broke it apart to make kerosene and, eventually, gasoline, Thomas M. Connelly Jr., DuPont's chief innovation officer, said Monday on a conference call with analysts.
DuPont is trying to become a big player in a world where enzymes are used to reduce plants to chemical components for renewable materials and fuels. The goal is to replace the chemical catalysts that have been used for a century to break down oil and natural gas into chemicals that go into plastics, nylon, and other materials.
DuPont already makes a nylon-like material, Sorona, partially from corn at a three-year-old biorefinery in Tennessee, with the help of a Danisco subsidiary. An expansion is adding 35 percent to that plant's capacity, DuPont said last month.
DuPont and competitors have been in a race to cost-effectively make ethanol from plant fibers, known as cellulose. Most ethanol is produced by fermenting sugars in kernels of corn, an important food source. The DuPont Danisco cellulosic ethanol plant in Vonore, Tenn., is expected to begin commercial production this year.
Combined, DuPont's and Danisco's various industrial biotechnology businesses had about $1 billion in annual sales last year, DuPont said. DuPont estimated Danisco's 2010 sales at $2.6 billion. DuPont is expected to report 2010 revenue of $32 billion, according to a JPMorgan report.
Danisco, which traces its roots to a distiller and a sugar company in 19th-century Copenhagen, also has a specialty food-ingredient business that fits with DuPont's operations that sell soy protein and are test-marketing biotech soybeans that contain omega-3 fatty acids, commonly found in certain cold-water fish and in some nuts. DuPont entered the soybean business through its acquisition of Pioneer Hi-Bred for $9.4 billion.
On its website, Danisco, which has 80 locations in 40 countries, says its ingredients are used in about half the ice cream and cheese and a quarter of the bread produced globally.
Bond analyst Carol Levenson, of Gimme Credit L.L.C., said in a note that DuPont was buying "an attractive business at a less-than-ridiculous price that offers it good diversification and growth prospects."
DuPont said it would pay for Danisco with $3 billion in cash on hand and would borrow the rest. The deal includes the assumption of $500 million in Danisco debt. DuPont's shares closed down 73 cents, or 1.5 percent, to $49.03 on the New York Stock Exchange.
At a Glance
DuPont
Business: Diversified chemicals.
Headquarters: Wilmington.
CEO: Ellen Kullman.
Founded: 1802.
Revenue: $26.1 billion (2009).
Employees: 58,000.
Danisco
Business: Biofuels,
food additives.
Headquarters: Copenhagen, Denmark.
CEO: Tom Knutzen.
Founded: 1989.
Revenue: $2.4 billion (2010).
Employees: 6,800.
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