Chr. Hansen taken over by private equity

The price for the food ingredients sector of the Danish giant was above analysts expectations, which ranged from €700m to €1 billion.

Chr. Hansen has been snapped up by European private equity firm PAI Partners for €1.1 billion. The price for the food ingredients sector of the Danish giant was above analysts expectations, which ranged from €700m to €1 billion.

The €1.1 billion equates to 2.4 times the company’s 2004 sales, or 13.6 times operating earnings, suggesting that the price for ingredient companies is often undervalued. “The price is a reflection of what the buyer perceives the value of the business to be,” Chr. Hansen CEO Lars Frederiksen told FoodIngredientsFirst. “We are very pleased with the price tag as it is a true reflection of the potential for our ingredients business,” he added.

The acquisition by PAI followed a number of rounds involving industry and financial bidders, with PAI finally emerging with the best offer. Frederiksen said that PAI triumphed on this considering price, speed of process and thoughts on the future process for the company. While PAI had been in the running from the beginning, Frederiksen would not reveal the other players left at the end.

Both Dutch company DSM and Irish giants Kerry had been tipped to make a move for Chr. Hansen and losing out is bound come as a major disappointment for them. Kerry and DSM clearly undervalued the Chr. Hansen business, which has a strong position in cultures, enzymes, natural colours and flavour solutions.

The acquisition follows a spell of recent consolidation in the ingredients industry, which most recently saw Danisco finalising the takeover of Genencor International. Chr. Hansen looks set however, to remain under much the same structure as before, after being taken over by a non-ingredients player. PAI stated that it intends to maintain the decision centre in Hørsholm and to grow the business through continued expansion of the geographic market coverage, investment in capacity and R&D as well as potential add-on acquisitions.

“We are very excited about the new owner. We have an owner who wants to continue with our name and management structure and an owner with the potential for growth via acquisitions,” Frederiksen said. He revealed that PAI is using Chr. Hansen as a platform for growth in the ingredients industry, with the company sharing the view that the industry will undergo plenty of consolidation in the years to come.

PAI has led several high profile European leveraged buyouts of sector-leading companies in recent years. Acquisitions have included: United Biscuits, a public to private of the #2 biscuits manufacturer in Europe (€2.3 billion); and Yoplait, the #2 worldwide producer of fresh dairy products.

News that an ingredients company did not win out in the race for Chr. Hansen is set to intensify competition for Degussa Food Ingredients even further, as the major players in the industry look to expand. With money still in hand from the lost Chr. Hansen opportunity, the Degussa Ingredients sale is bound to be given a kick-start.