Danisco is to acquire an ingredients division of Associated British Foods to boost growth and extend its European customer base.
The Denmark-based worldwide ingredients producer has signed an agreement for the acquisition of the shares in UK-based emulsifiers producer Abitec. It is conditional upon the approval of the appropriate competition authorities.
"By combining Danisco's emulsifiers technology and production capability with Abitec's customer base and market access, we will create an even better platform for developing new products and supporting customer needs and thereby further enhance our position," said Martin Klavs Nielsen, head of Danisco's emulsifiers business.
No one was available from either company to comment prior to publication on the effects on Abitec's customers, the reasons for ABF wanting to sell or the aims of the aims of the acquisition.
However, it did say it was part of its strategy to prioritise its core ingredients business following last September's decision to de-merge its sugar and ingredients operations.
The rationale behind the split is that the two companies would have the best development opportunities in their discrete areas of activity, while shareholders would have the choice on whether to back sugar or ingredients.
Revenue for the year-to-date was DKK 3311m (€443.7m), compared to DKK 3623m (€485.5m), and EBIT margin DKK 9.8m (€1.3m), up from DKK 9.1m (€1.2m).
Danisco would not reveal the amount of the acquisition but said that Abitec generates revenue of around DKK 200m (€26.8m).
Upon completion of the agreement, Abitec will be integrated into Danisco's emulsifiers business.
Founded in 1987 as AB Technology, Abitec has a sister company in the US. It has not been revealed whether this will be included under the acquisition.
Abitec produces a range of medium-chain triglycerides (MCT), which are fatty acid esters of glycerol, and emulsifiers.
Its food emulsifiers provide functional properties for the food industry, and are used in a wide range of applications such as bread, ice cream, margarine and dairy products.
Dansico indicated that it hopes to increase its production of emulsifiers based on natural raw materials, as these can be used by food producers to counter increasing raw material costs.
The cost of food and ingredients has shot up across the industry due to higher raw material and energy costs.
The higher cost of raw materials affects every process in the food industry, with the increased price of feed getting transferred from farmers onto ingredients' producers, then onto manufacturers and retailers. Meanwhile, poor weather last year has destroyed stock and affected production.
According to Standard & Poor's, food hikes are set to spread and continue well into this year.