The cash deal for $1.087bn (€829m), if it is accepted by Martek’s shareholders next month, represents the largest investment by DSM’s nutrition arm since it paid €2.5bn for the vitamins business of Roche in 2002, board member Stephan Tanda told NutraIngredients this morning.
He said that while DSM possesses an omega-3 ingredient called Ropufa, it is fish-sourced and has not been targeted at the infant nutrition sector, instead favouring traditional foods and supplements. Nor does it have the, “strong vegetarian, algae platform that also offers industrial biochemical and pharma potential”.
Third party credit rating agencies said DSM had an investment fund of between €2.5-€3bn before the Martek offer, and Tanda said the company continued to eye acquisition targets.
Tanda said DSM’s global reach would enable it to develop Martek’s DHA (docosahexaenoic acid) infant nutrition business in Asia, Europe and other markets, with dietary supplements and feed markets also a priority.
The move comes at the end of a year in which DSM launched fish-sourced versions of its DHA ingredient aimed at the infant nutrition market, and Martek signalled its move to extract EPA (eicosapentaenoic acid) from its algae vats.
It was not made clear what would happen to these initiatives, in the light of the acquisition.
Tanda said Martek’s ‘life’sDHA’ brand would be retained, if not the Martek name itself.
Market analysts told NutraIngredients that the Martek acquisition and divestments in the chemicals area reflected a strategic decision by DSM to enhance its animal and human nutrition focus amid rumours of itself being an acquisition target.
Channels and premiums
DSM had no intention of selling Martek’s recently acquired consumer supplements brand Amerifit. “This is a nice fit,” he said. “It’s a good channel for ingredients for Martek and DSM.”
The $31.50 offer amounts to a 35 per cent premium for NASDAQ listed Martek shareholders over yesterday’s closing share price of $23.36 – a typical premium for such buy-outs. It is a 39 per cent premium over the average price of the stock for the past 90 days, which itself represents a multiple of 8.5 EBITDA, again standard for such acquisitions.
Martek, which has annual revenue of $450m, and DSM have a working relationship as they have worked together on omega-6 ARA (arachidonic acid) for almost 20 years.
“We are pleased that this transaction appropriately recognizes the value of Martek’s nutritional ingredients, technology platform, market position and skilled workforce, while providing significant value to our stockholders,” said Martek chief executive officer, Steve Dubin. “We have worked collaboratively with DSM for many years, and we are confident that they share our vision for Martek’s future.”
Martek was not available for further comment at the time of publication.
In the same statement, Feike Sijbesma, chief executive officer/chairman of the DSM Managing Board said: “This acquisition is an attractive and logical next step for DSM. Martek’s leading position in healthy, natural ingredients and algal technology will add a new growth platform to our Nutrition business. DSM is a unique partner for Martek and, with our strong track record of growing businesses in competitive environments, we believe we can help to lift Martek to the next level.”