Analysts: DuPont Danisco buy-out may end in fire sale

31-Jan-2011 - Last updated on 31-Jan-2011 at 13:13 GMT

Analysts are saying Danisco could be carved up by its new owner DuPont, which they suggest is most interested in the Danish company’s enzymes for biofuels and that the food side of the business may be jettisoned.

If this was to occur Kerry Ingredients and Tate & Lyle have been mentioned as likely suitors even as Cargill this was rumoured with a takeover of T&L

Market analyst Euromonitor said: “Opinion remains divided on DuPont's level of interest in the food ingredients activities and some analysts are suggesting that it will not be long before certain Danisco assets are offered up for sale, something that would inevitably attract a flurry of interest from competitive food ingredients companies, including the likes of Kerry Ingredients, a traditionally acquisitive firm, and Tate & Lyle, which is believed to have a sizeable acquisition pot at present.”

Euromonitor said sustainability had become a primary issue for DuPont and was a significant driver in its investment decisions, including the €4.9bn Danisco buy-out.

“It could well be a sign of things to come in future relations between the chemical and food ingredients categories,” Euromonitor observed. “As sustainable production becomes increasingly important at all levels of industry, it is inevitable that companies with a strong focus on chemicals and other less environmentally sustainable products will look to expand into areas that offer greater scope for expansion within environmentally acceptable boundaries and the world's major food ingredients businesses are likely to look increasingly attractive.”

DuPont and Danisco formed a biofuels partnership in 2008 to develop cellulosic ethanol. Danisco’s Genencor enzymes and industrial biotechnology business accounts for about a third of its turnover and grew 12 per cent in 2009-2010.

“In fact, non-food activities have stood out as a major growth market for Danisco in recent times, having increased their share of total revenue from 19% to 33% in just the past five years, a development that has brought Danisco more in line with DuPont, offering certain synergies as well as the chance for DuPont to expand into new areas,” Euromonitor observed.

However other analysts said food ingredients were, “an under-appreciated growth area”.