Chr. Hansen and Novozymes write history as Denmark’s largest merger, scaling up production

19 Dec 2022 --- Enzymes manufacturer Novozymes has agreed to buy Chr. Hansen to expand in the nutrition industry. The merger resulted in a US$12.3 billion deal, writing history as the largest Danish merger on record and will close by the end of 2023. 

“The combined group will have increased scale and efficiency and more capabilities to unlock significant growth opportunities by translating needs into transformational solutions for our customers and consumers,” Anders Lund, executive vice president for Consumer Biosolutions at Novozymes, tells NutritionInsight.

“It will also be an even stronger ‘home’ for top talent, bringing together a global pool of passionate and diverse employees with the skills and ambitions to drive positive impact for the planet and the world,” he states. 

Lu Ann Williams, global insights director at Innova Market Insight, tells us, “this is a great development for the new company and Denmark. This deal represents nearshoring cutting-edge R&D. These two companies are leaders in complementary areas of biotech, and it will be exciting to see the developments that come out of this merger.” 

NutritionInsight reached out to Chr. Hansen, for further comments on the merger.

A spokesperson told us “unfortunately Chr. Hansen is in no position to provide further comments than what has already been communicated.”

Scaling up in fermentation
Lund further details that the merger will broaden the R&D and production coverage worldwide through a global scale and local presence.

Williams at Innova Market Insights says that Fermentation is one of the most exciting areas in nutrition.“The new company would have 38 R&D and application centers, 23 manufacturing sites, and approximately 2,000 employees in R&D. This stands out in the bio-based sector. With €350 million (US$3.72 million) reinvested into R&D annually, representing an estimated 10% to 11% of combined sales – this also stands out in the bio-based sector.”

He explains that the merger will allow the companies to be stronger equipped to transform customer needs into value-added biobased solutions by using existing solutions and leveraging them across combined commercial reach, advanced discovery, applied research and health benefit documentation, coupled with unparalleled fermentation scale-up capabilities.

“Fermentation is one of the most exciting areas in nutrition, and there are so many applications that it’s difficult to focus on just one or two things. However, in the area of trends that our market research focuses on, sustainability continues to grow in importance for consumers, and there is also increased interest in plant versus animal proteins,” states Williams at Innova Market Insights.

Meaning for bioscience innovation
The combination aims to create a leading global partner for both companies’ customers and unleash biological solutions’ full potential. 

The combined group will be science-based, and the science will be “agnostic to the market.” 

“We will pursue innovation and applied research to open up additional opportunities across value chains and different sectors. Being two companies with a shared Danish heritage, a purpose-driven culture and complementary values, with legacies rooted in innovation, we will align our unique capabilities and application understanding from lab to global scale,” says Lund.

We expect to deliver improved and accelerated long-term growth, more than our individual companies would have been able to achieve on a standalone basis, he comments.

“Together, we will be equipped to stand stronger in addressing global challenges, including enabling healthier lives, transforming food systems, and accelerating toward a climate-neutral society.”

Stock disequilibrium
The shareholders of Chr. Hansen will receive 1.5326 new B-shares in Novozymes per share after the merger, creating a 49% premium. After the announcement, Novozymes stock fell by 16%, while Chr. Hansen increased by 36%, according to Bloomberg.

The announcement unveiled expected annual revenue of €3.5 billion (US$3.72 billion) and detailed that annual revenue synergies are estimated to be €200 million (US$212.6 million).

Until 2025, the expected organic revenue growth compound annual growth rate is 6% to 8%.

“While it combines our two companies, Novozymes is paying a premium to Chr. Hansen’s shareholders and, thereby, Novozymes is the surviving entity,” asserts Lund. The merger will allow for accelerated long-term growth, more than the individual companies would have been able to achieve, Lund notes.

“Based on Novozymes’ closing share price of its B-shares as of December 9, 2022, the Merger Consideration is to be received by Chr. Hansen’s eligible free float shareholders represent a premium of approximately 49% to Chr. Hansen’s closing price on December 9, 2022, and 38% on a fully blended basis inclusive of the consideration for Novo Holdings’ current Chr. Hansen shares.”

Playing with trust?
Meanwhile, Bloomberg previously reported that the deal “might create distrust” as both firms are in the food ingredients industry and that industry players have expressed worries about aligning with international regulations.

Mauricio Graber, president and CEO of Chr. Hansen says that these two “iconic Danish companies” represent a natural step toward addressing the needs of tomorrow.

“More and more, we see sustainability and health linked; consumers think that products that are responsibly made are also better for their health. So thinking about this merger, there are many opportunities for a broader nutrition impact such as new technologies for soil health or animal health that translate into benefits consumers are looking for,” notes Graber.

“The business papers are full of stories about the challenges of integrating companies,” adds Williams. 

“However, some advantage of this merger is the combination of two Danish companies that are both working in highly technical areas, so there will be many similarities in their approaches to research and management of a science-driven organization,” she concludes.

By Beatrice Wihlander

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