Chr. Hansen to sell Natural Colors business to EQT in €800m deal

28 Sep 2020 --- Chr. Hansen Holding has revealed that EQT, a global investment organization, will acquire the Natural Colors Division, a subsidiary of Chr. Hansen, in a deal worth €800 million (US$943 million). The transaction is subject to customary conditions and regulatory approvals. It is expected to close in the first half of 2021.

“The divestment of the Natural Colors Division completes the review part of our recently launched 2025 Strategy,” says Mauricio Graber, CEO of Chr. Hansen. 

He also notes that the company can focus on “fulfilling the ambition of becoming a pure-play, microbial and fermentation company with profitable growth.”

In a statement sent to FoodIngredientsFirst from Chr. Hansen, the company says: “The agreement with private equity fund EQT concludes the strategic review announced in July 2020, where Chr. Hansen’s Board of Directors and the Executive Board decided to explore strategic options for the Natural Colors business as it does not share the microbial and fermentation technology platforms.”

“We have had a good, thorough process with which we have been pleased. We are also very pleased with the outcome communicated on September 26. We have no further comments as we are in a silent period leading up to the publication of our annual report on October 8.”

Continued organic growth 
EQT intends to build on the existing strategy of continued organic growth in current markets, focusing on the US and Asia. The company will also support acquisitive expansion within the highly fragmented foods coloring market by utilizing the natural colors platform for industry consolidation. 

EQT IX is expected to be 15 to 20 percent invested with this transaction, based on its target fund size.

Moreover, EQT plans to invest significantly in its organization and strengthen its digital infrastructure, sustainability capabilities and supply chain setup. 

Natural Colors is expected to leverage EQT’s inhouse expertise within digitalization and sustainability, and EQT’s global advisory network, which possesses significant experience from developing strong ingredient companies.

“Natural Colors fits very well with EQT’s thematic investment criteria and is operating in two of EQT IX’s five prioritized sub-sectors within Industrial Technology. EQT’s ambition is to help the business achieve further growth both organically and through acquisitions,” notes Mads Ditlevsen, a partner at EQT Partners, and investment advisor to EQT. 

Favorable secular megatrends support Natural Colors’ underlying market, says Chr. Hansen.Meanwhile, Klaus Bjerrum, executive vice president of the Natural Colors Division, says: “EQT has acquired our great business [pending closing] to grow it organically and inorganically based on our capabilities and organization.”

Natural colors scope
Headquartered in Hørsholm, Denmark, Natural Colors is a developer and manufacturer of natural coloring ingredients, serving over 1,600 customers in the F&B industry. 

The Natural Colors division employs around 650 people and has grown organically by 9 percent annually during the past five years up to 2018/19. The company generated sales of €224 million (US$260 million) in 2018/19. 

Natural Colors’ products are made from all-natural fruit and vegetable concentrates from sweet potatoes, grape skin, spirulina, carrots and beetroots. 

The products are primarily used within F&B applications where the conversion from artificial to natural colorants is highest, such as dairy- and fruit preparations, confectionery, ice cream and prepared foods and beverages. 

Natural Colors’ underlying market is supported by favorable secular megatrends, such as increasing consumer awareness around health and the environment, the ongoing transition from synthetic components to natural ingredients, and a growing demand for sustainable and plant-based food. 

By Elizabeth Green