Cargill swoops for Degussa in 540 million euro deal

The agreement marks a very significant step in Cargill's strategy of becoming a leading provider of specialty ingredients and ingredient systems to food and beverage companies globally.

Cargill has won the bid for Degussa’s food ingredients business in a 540 million Euro swoop (670 million US-Dollar). The transaction is still contingent on the approval of the Degussa Supervisory Board and the relevant regulatory authorities. Spokesperson Hannelore Gantzer told FoodIngredientsFirst that she expects the process to be cleared 'in the next few months'. She would not comment on the price of the Degussa acquisition, which was below analysts expectations. 

The sale of Degussa was surrounded by intense secrecy with the Dusseldorf chemical giant attributing colours to the bidders. One wag said the red team must be from the east, and other teams reputedly got green and blue and so forth. Enquiries to the divisions were on behalf of the colour of the bidders. It all added a great debt of mystery and supposition to the process. In the end hotly topped Kerry and Symrise (it has a plant around the corner from the Gras based Degussa flavours business). Degussa flavours sports the Maxens flavours logo and seemed an obvious fit. On the internet that was described as a done deal. But in the end the victor was Cargill which already owns the leading British flavour house Duckworth. Both these flavor suppliers are strong in sweet flavours and beverages. 

Spokesperson for Cargill, Geraldine O’Shea would not reveal to FoodIngredientsFirst how long the company had been in the running for Degussa but said, “we are obviously well aware of what is happening in the market around us”. Which remaining companies were beaten off in the final process was also left unanswered, although it was already known that Symrise had advanced to the second round of bidding.

Degussa Management Board Chairman Prof. Utz-Hellmuth Felcht said, "Food Ingredients are a strategically ideal fit for a strong global food industry player such as Cargill. We feel that we have placed these operations in good hands, and are very satisfied with the transaction as a whole."

In a consolidating food ingredients industry, the Degussa Management Board decided in August 2004 to divest its Food Ingredient business in order to provide it with the opportunity for a further development into a leading global position. "This agreement marks a very significant step in Cargill's strategy of becoming a leading provider of specialty ingredients and ingredient systems to food and beverage companies globally," said Warren Staley, Cargill chairman and chief executive officer.

"This will be our largest acquisition since Cerestar in 2002 and greatly strengthens our range of texturant systems and flavouring capabilities. It supports our strategy of becoming the recognized global leader in providing food and beverage companies with innovative solutions that help them succeed." After selling the Fruit Systems activities in early 2005, today the Degussa Food Ingredients Business Unit consists of the Texturant Systems and Flavors Business Lines.

Texturant Systems is comprised of product groups in the areas of hydrocolloids, blends, lecithin, cultures and bioactive ingredients. The Flavors Business Line produces flavoring solutions for the beverage, dairy, confectionary and other food sectors and provides key capabilities in formulation, application, analytical chemistry and sensory analysis. The expertise of Degussa's Food Ingredients employees will complement and strengthen that of the existing Cargill organization.

When the acquisition is finalized over the course of the next few months it will become clearer what Cargill’s exact plans are for the company and how it will collaborate across its divisions. “We absolutely see synergies across existing parts of our businesses”, said O’Shea.