CSM Shareholders Approve Bakery Supply Divestments

CSM announced on 7 May, 2012 its intention to transform the company into a bio-based ingredients company comprising its Purac and Caravan Ingredients businesses. This will involve a divestment process for its North American and European Bakery Supplies businesses.

4 Jul 2012 --- The CSM Extraordinary General Meeting of Shareholders, held on 3 July, 2012, has approved the proposed strategic transformation of CSM into a bio-based ingredients company by a strong majority.

CSM announced on 7 May, 2012 its intention to transform the company into a bio-based ingredients company comprising its Purac and Caravan Ingredients businesses. This will involve a divestment process for its North American and European Bakery Supplies businesses.

CSM spokesperson Saskia Nuijten told FoodIngredientsFirst that the divestment is expected at the beginning of 2013, although no details of initial interest in the bakery supplies businesses were revealed at this time.

In May, the company reported that Bakery Supplies requires funding to participate in the market consolidation, and bio-based ingredients also has attractive opportunities to invest in value creating, high growth activities. In the longer term CSM does not have sufficient financial resources to exploit both. CSM therefore proposes to start a major divestment process for the North American and European Bakery Supplies businesses that will enable the group to redeploy capital into activities better able to deliver higher growth and enhanced shareholder value.

The Bakery Supplies businesses to be divested had sales in 2011 of € 2,409 million, EBITDA before central costs and one-off costs of € 127.5 million, and EBITA before central costs and one-off costs of € 86.3 million. These activities have strong market positions in Europe and North America, excellent management, and well filled innovation pipelines. Given that the current environment is expected to lead to further industry consolidation, they are likely to be of greater value to another owner, and to be better positioned to participate in that consolidation.

Purac is an innovative biotechnology company. It is the world market leader in lactic acid and its derivatives. Purac is leveraging its fermentation capabilities to expand beyond lactic acid into other bio-based alternatives for petrochemically based products.

Caravan Ingredients has leading positions in the North American markets for specialty ingredients including lactic acid based emulsifiers, functional blends containing enzymes, and fortification ingredients.

In total, the combination of Purac and Caravan Ingredients in 2011 had sales of € 704 million, EBITDA before central costs and one-off costs of € 123.5 million, and EBITA before central costs and one-off costs of € 93.0 million; a margin of 13.2%. The combination will be a leading supplier of innovative, bio-based ingredients for preservation, nutrition, fortification and stabilization, serving end markets in food, chemicals and polymers. The combination will target growth opportunities in new lactic acid applications such as bio plastics, animal health and nutrition, as well as next generation, bio-based alternatives for oil-based materials, all with superior performance and environmental credentials.

The sale of a business with sales of € 2,409 million in 2011would significantly reduce the size of CSM, but also open it up for serious expansion in the ingredients field. "We would indeed expect to grow through the proceeds of the sales. Part of the proceeds would be used for a reduction in debt, another part in capital for organic growth and a further amount would be distributed to bolt-ons for further growth," Nuijten commented.

CSM is the largest supplier of bakery products worldwide and is global market leader in lactic acid and lactic acid derivatives. CSM produces and distributes an extensive range of bakery products and ingredients for artisan and industrial bakeries and for in-store as well as out-of-home markets. It also produces a variety of lactic acid applications for the food, chemical and pharmaceutical industries. CSM operates in business-to-business markets throughout Europe, North America, South America, and Asia, generates annual sales of €3.1 billion and has a workforce of around 9,700 employees in 28 countries.