FMC Acquires Omega 3 Concentrates Producer Epax AS for $345 Million

25 July 2013 --- FMC Corporation has acquired all of the shares of Epax, a leading manufacturer of high purity, premium grade Omega-3 fatty acid concentrates that are used in nutraceuticals, pharmaceuticals and food.

Epax was part of Trygg Pharma Group AS, an Omega-3 pharmaceutical company. This acquisition, which is effective immediately, strengthens and expands FMC's presence in the high growth nutraceutical market.

Epax uses proprietary purification and concentration production techniques that address the high-value, fast-growing market segments for high concentration Omega-3 fatty acids. FMC's acquisition will include Epax's two world-scale production facilities in Alesund, Norway, and Seal Sands, UK. The transaction, valued at approximately $345 million, reflects a 2013 EBITDA multiple in line with FMC's current trading multiple and is expected to be immediately accretive to earnings per share.

“In April 2013, FMC announced their portfolio evolution, where we committed to expanding our presence in high growth health & nutrition markets and wanted to pay particular attention to the fast growing nutraceuticals area. In the past we have done a little work with products like maqui berry and fucoidian, but we really wanted to investigate how we could provide a deeper foray into that space,” Lindsay Torriero, Marketing Communications Manager at FMC Health and Nutrition told FoodIngredientsFirst.

“Omega 3 is really predicted to lead that nutraceutical market. It is one of the most widely studied nutraceuticals, with overwhelming support on the health benefits. This is a great first step for us to execute on our strategy to grow in health & nutrition and what we really want to do as a platform business is to continue to grow our historical solution providing access to these important markets and find a partner like Epax that shared our values,” she added.

FMC’s new nutraceutical division will initially operate as a standalone. “We are going to work quickly but thoroughly on an integration plan that will involve both FMC and Epax employees. However, in the short term Epax and the nutraceutical piece will operate as a standalone. Epax is bringing on a manufacturing plant in Seal Sands in the UK in the coming months and we want to ensure that that opens safely and that there are no distractions through the integration,” says Torriero. “In terms of synergies, we share a lot of customers on the pharmaceutical side, so that we can offer more resources to those customers. We have done a lot of investigation into the pharma space from a technical perspective, but we didn’t have feet on the ground or a manufacturing presence to really execute.”

The market for supply of Omega-3 fatty acids is $2.1 billion per year, projected to grow 12 percent to 15 percent annually. Consumer awareness about cardiovascular, brain, and numerous other health benefits of Omega-3—supported by years of scientific studies and regulatory organizations—continues to drive strong demand, especially for high purity, highly concentrated products. Omega 3 has therefore been a target area for a number of traditional chemical players in recent times, with DSM and BASF strengthening their foothold in this space in the last couple of years, through respective acquisitions such as Ocean Nutrition Canada and Pronova. FMC is the latest to join this consolidating sector. “The area has great growth potential and we really saw an opportunity to take a look at the leading players out there, of which Epax is one, especially in their ability to produce high concentrate products,” says Torriero.

This is likely to be the first of a series of acquisitions from FMC and is the largest at the company as a whole in recent times. Exact future ingredient growth platforms are not being disclosed, however. “We really see this as the first step in executing the strategy in terms of the high growth areas of food, pharmaceuticals, personal care and nutraceuticals. We are really looking at all areas that make sense for what the strategy is going forward. We are taking a very close look at what’s out there, so that we can prove ourselves as a solutions provider in this space, as we have in food and pharma for more than 75 years,” Torriero commented.

Ola Snove, Epax CEO called it, "an exciting time for our Epax business, employees and customers.” “We believe FMC is the right owner to take this business forward, given its technological and manufacturing expertise with marine-sourced inputs, its long operating history in Norway and the U.K., and its strong foundation in high-value ingredients for the food and pharmaceutical markets," Snove said. "FMC's financial strength, global market access and commitment to growth will help accelerate our ability to serve the quality and reliability demands of our customers and consumers. I'm personally excited to become part of the FMC team."

"For decades, FMC has been known in the pharmaceutical and food markets as a leader in functional ingredients—highly focused on customer needs, product quality and consistency, and customized innovation," said Mike Smith, vice president and global business director, FMC Health and Nutrition. "This acquisition introduces a premium Omega-3 fatty acid technology and brand to our portfolio of microcrystalline cellulose, alginates, carrageenan, pectin and other functional ingredients. We look forward to working with the Epax team to serve the market with an even broader portfolio of products, particularly in the high growth nutraceutical market."

As a part of the overall transaction, FMC has entered into a long-term supply agreement with Trygg Pharma to provide Trygg with high-concentration Omega-3 fish oil for use as an active pharmaceutical ingredient.

Bank of America Merrill Lynch acted as sole financial advisor to FMC on this transaction.

by Robin Wyers