Aarhus and Karlshamns set to merge

27/05/05 Danish based Aarhus United and Swedish company Karlshamns are set to merge in a combination of two of the leading manufacturers of high value-added specialty vegetable oils and fats. Major shareholders from the two companies have joined forces.

UIE, which owns a 41% stake in Aarhus stated that in cooperation with the main shareholder of Karlshamns, Melker Schörling, which owns a 31% share, they have submitted a joint offer to the shareholders of Aarhus United A/S and Karlshamns AB to take over their shares – against payment in a combination of cash and shares in a new holding company. Aarhus reported that its Supervisory Board of sees the proposed merger as “very interesting” and presumes that it will include “considerable synergies”. In 2004, the combined entity’s pro forma net sales were DKK 7.9 billion.

The news followed months of speculation in which the proposed sale continued to be delayed. The market for oils and fats is 100m tons per year and the newly merged company will only control 1m tons of this. However Aarhus and Karlshamns do not concentrate on the lower margin businesses of soy or rapeseed oil, where the likes of ADM and Cargill dominate.

Esben Vibe at Aarhus told FoodIngredientsFirst that the combination is a logical move in the niche areas of higher margin specialty fats for the chocolate and cosmetics industry.

“The two companies are rather complementary in the different products they offer. Also geographically it made a lot of sense to create a common company. It will have a more effective cost structure,” he said. Karlshamns is planning to market more of its dairy fat alternatives in the US and South America and Aarhus’s knowledge on these markets “can help enforce the movement”, Vibe explained.

Other major benefits are that the combined entity will have is that it will become one of the world’s leading suppliers of cocoa butterialternatives (“CBA”) to the international chocolate manufacturers with an increased opportunity to achieve the industry’s lowest costs. The merger would create a strong food service business in the UK where both Aarhus United and Karlshamns hold attractive market positions. Meanwhile the combined entity will be attractively positioned to expand the food service business to Northern Europe, while it is also believed to be able to achieve substantial synergies both in terms of improved utilization of the existing plants and equipment, but also in terms of opportunities for improved capital expenditures.

Vibe said that the merger would take two or three months to be rounded off and it could be expected in September or October.