DUTCH group DSM, the world's largest vitamins maker, is buying US baby food ingredients maker Martek Biosciences Corp for an agreed $1.1bn (£700m), kicking off an expected acquisition spree.
DSM said the offer price of $31.50 per Martek share was a 35 per cent premium to its December 20 closing price.
DSM has focused on nutritional products, moving away from low-margin bulk chemicals. Last week it completed divestments ahead of an expected series of acquisitions to use its more than €2bn (£1.7bn) cash pile.
The deal gives DSM a new growth platform for natural, healthy polyunsaturated fatty acids nutrition ingredients, adding that Martek is a global leader, especially in infant formula nutrition.
“Martek’s leading position in healthy, natural ingredients and algal technology will add a new growth platform to our nutrition business,” chief executive Feike Sijbesma said.
Martek, whose customers include Kellogg's, Mead Johnson Nutrition Co and French group Danone, had annual net sales of $450m (£289m) for its fiscal year ending October 31, 2010 and estimated earnings before interest, tax, depreciation and amortisation (EBITDA) of $115m to $120m.
Based on the agreed acquisition price, DSM is paying about nine times estimated EBITDA.
In February, Martek bought dietary supplement company Amerifit to broaden its product range away from baby food ingredients, which made up about 90 per cent of its 2009 sales.
Theodoor Gilissen analyst Tom Muller said the deal was a “good stepping stone both regionally and technologically”.
Analysts had previously said DSM, which also makes performance materials used in bullet-proof vests and fishing nets, could become a takeover target if it did not make a large acquisition soon.
DSM said the Martek deal, expected to close by the second quarter of 2011, would be immediately earnings per share accretive for DSM by 15-20 euro cents on a full-year basis and will also provide material revenue synergies.
City A.M. Reporter