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Competition watchdog extends probe of Danisco-Nordzucker deal

By Lindsey Partos , 03-Nov-2008

The Danisco deal to spin-off of its sugar arm to Germany's Nordzucker faces delays after German competition authorities take their review into a second phase, opting to investigate the €750m takeover further.

Ending months of speculation, in July this year the Danish ingredients group announced it would sell its sugar division to Nordzucker, part of Danisco's strategy to evolve into a "focused, bio-based, market-driven ingredients provider".

The deal is subject to approval from anti-trust authorities and shareholders. News from the Federal Cartel Office in Bonn at the end of October on its decision for further investigation will set the deal back by a minimum of three months.

Commenting on the move by the German competition body, a spokesperson at Danisco said: "This was no surprise at all."

"Given the size of the deal, we expected this," they said to FoodNavigator.com.

Danisco and Nordzucker must now wait until the end of January next year for news from the competition authorities regarding clearance of the deal, although this timeline can be stretched depending on the needs of the investigation.

Competition rules regarding mergers and acquisitions in the EU-27 bloc dictate that deals concerning companies generating between €500 million and €5 billion in revenue worldwide, and €25 million in the national country, will be dealt with by competition authorities in the pertinent national country.

When the firms exceed €5billion worldwide in revenue, and €250 million within the EU, it is the competition body in Brussels that takes the mantle for investigating, and giving clearance, or not, on the deal.

One exception to this rule is when two-thirds of the revenue is generated by the firms in one country. When this is the case, the national competition authority can investigate the deal and permit, or deny, the go-ahead.

"We can clear a case in the first phase of investigation, but if we see some difficulties we can investigate further," a press officer from the German competition authority's Bundeskartellamt explained to FoodNavigator.com.

The sugar deal

Hans-Gerd Birlenberg, CEO of Nordzucker, said: "With Danisco Sugar we are gaining a partner which is in excellent all-round shape and which will strengthen our operations substantially from day one," when the two firms announced the deal in July this year.

Under terms of the deal the Danish producer of sugar and bioethanol, Danisco Sugar, and its subsidiaries, will be taken over by German Nordzucker. Nordzucker has agreed to acquire Danisco Sugar for an enterprise value of DKK 5.6 billion, with the addition of around DKK 600 million from sale of EU sugar quota.

Danisco Sugar owns sugar production facilities in Denmark, Sweden, Finland, Lithuania and Germany and is a supplier of sugar and sugar beet seeds to several European countries.

Nordzucker

With an estimated turnover of €1.3 billion in the European market, German Nordzucker is a leading producer and supplier of sugar, fodder and bioethanol in Europe. Nordzucker is partly owned by sugar beet growers and, with a staff of around 2,900 employees, produces sugar at its factories in Germany, Poland, Slovakia and Serbia.

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