Chr. Hansen Acquires Valio's LGG Business for €73 Million

14 Sep 2016 --- Chr. Hansen has signed an agreement with Valio OY to acquire the Finnish company’s LGG business for a cash consideration of €73 million ($82 million). As part of this agreement Chr. Hansen will take over a number of specialty strains already in production and a bacterial collection of around 3,200 strains. In addition, Chr. Hansen and Valio will enter into a strategic research and development collaboration to extract further value within dairy. 

Natural solutions that advance human health are in high demand and the expected growth for microbial solutions in this industry is 7-9%. Chr. Hansen is the world’s leading supplier of probiotics to dietary supplements, infant formula and dairy, and through the acquisition of the LGG business, the company is now further strengthening its microbial platform across all three categories.

Lasse Nagell, SVP Human Health at Chr. Hansen told FoodIngredientsFirst that the company is still confident about the future for the probiotic market, despite the regulatory hurdles around health claims in Europe. “We continue to see market growth in the probiotic segment across industries. The regulatory changes in Europe impacted the market growth in Europe but had limited effect globally,” he says.

Alongside Chr. Hansen’s own BB-12 strain, the Lactobacillus rhamnosus GG (protected under the trademark LGG) is the best documented probiotic strain in the world. It has been used in food and dietary supplements since 1990 and has a proven beneficial effect on the gastrointestinal and immune system. It has been studied in more than 200 clinical studies and described in more than 800 scientific publications.

Lars Bredmose, Senior Marketing Director, Food Cultures & Enzymes at Chr. Hansen told FoodIngredientsFirst: “The addition of LGG to our range of probiotic dairy cultures poses new exciting opportunities for our customers in the food space. We have been successful in developing easy to use solutions for probiotic yogurts with our existing probiotic strains, BB-12 being the most famous. With LGG we will be able to differentiate our offering further and also develop one-pouch culture solutions for blends of BB-12 and LGG in the same yogurt. This probiotic combination is particularly strong in boosting natural defenses in young people; university students and young achievers. That will enable our customers to target new dairy products to a fast moving and demanding consumer segment with a real need to stay fit. Adding LGG to our portfolio is not a revolution but a natural evolution of the differentiation options we offer our customers.” 

Ross Crittenden, Executive Vice President of The New Markets unit, License and Technology Sales unit at Valio stressed to FoodIngredientsFirst that the move does not mean that the company is reducing its footprint within the probiotics space at this time. 

“Valio is rather redirecting its activities in probiotics into its core retail consumer products business rather than into ingredient sales. In particular into our Gefilus branded probiotic products that combine the benefits of LGG with great taste,” he said.

He confirmed that Valio will reallocate resources to delivering new innovations in consumer branded dairy products to new markets.

Cees de Jong, CEO of Chr. Hansen Holding A/S, says: “One of the ambitions in our Nature’s No. 1 strategy is to expand our current business within microbial solutions for human health. The LGG strain and our own probiotic strain BB-12 are the best documented probiotic strains in the world and the acquisition allows us to capture the full potential of the LGG brand across markets for dietary supplements and infant formula offerings, as well as pursuing new opportunities in dairy.”

Lasse Nagell, Senior Vice President, Human Health, Chr. Hansen, says: “The markets for well documented probiotic strains are experiencing very strong growth in dietary supplements and drives an entire category in fermented milk products, such as yoghurt, kefir, etc. We believe that there are vast opportunities for the LGG brand considering Chr. Hansen’s wide geographic reach and deep technical knowledge.”

Chr. Hansen has been the largest producer of LGG products for human dietary and infant formula for more than 10 years. Apart from acquiring the full rights to the strain, Chr. Hansen also takes over a number of specialty strains already in production and a bacterial strain collection of around 3,200 strains. 

Annikka Hurme, CEO of Valio OY, says: “An important element in the deal is closer co-operation between the two companies’ world leading innovations teams, which will further strengthen the impressive science backing LGG.”

Crittenden said: “Chr Hansen has been producing LGG under license from Valio for more than a decade. The partnership with Chr. Hansen will provide a continued reliable source for this ingredient, as well as closer collaboration between the companies’ innovation teams.”

The acquisition will be funded through Chr. Hansen’s own cash position and existing credit facilities.

The acquisition of the LGG business is subject to customary closing conditions. Closing is expected during the fall of 2016.

Bredmose concluded: “Globally, we see a continued demand for healthy and specific health function targeted fermented milk products; but only if the solution is entirely natural and understood as such by consumers. We believe this offering will fit naturally into our range of dairy health options, alongside our existing nu-trish range of probiotics and the newly launched NOLA Fit lactose free and sugar reduction enzymes technology.” 

by Robin Wyers