Number two cultures slot for Danisco on Rhodia acquisition

Related tags Rhodia Gums E number Danisco

Ingredients giant Danisco leapfrogs into the second global position
for cultures as the Danish firm acquires the food ingredients arm
of ailing French chemical business Rhodia.

In a buy-out estimated at €250 million, the Danish giant will take on board the cultures, hydrocolloid and food safety product operations of Rhodia's ingredients business that generated around €211m in sales in 2003

"We'll gain the second position in cultures and a leading position in hydrocolloids,"​ a spokesperson for Danisco told​.

The announcement today confirms months of speculation that married Rhodia with a host of suitors, including DSM and Danisco. Speculation intensified in December when the French firm confirmed that it planned to divest €700 million in non-core assets in 2004 to slice away its heavy debt, blazing at €2.3 billion in 2003.

As the number one supplier of probiotics to supplements the Rhodia acquisition shoots Danisco from the number four to number two slot for cultures that includes bioproducts and food protection. "By acquiring Rhodia's ingredients arm we achieve a critical mass on cultures in the marketplace,"​ added the public Danish group.

In recent years the market has put pressure on Danisco to hit the acquisition trail in light of imminent reform to the European sugar regime that is slated to slash the bottom line of the company - a leading sugar producer - by as much as 40 per cent.

"The move fits in well with our goal to strengthen the business platform through acquisitions and organic growth," said the spokesperson.

But the current number one cultures player Danish group Chr Hansen - battling out the top two slots with Rhodia for many years - sees its position squeezed down by the acquisition.

"Chr Hansen is the number one in most culture areas and Rhodia was our biggest competitor. Now we will be head-to-head with Danisco,"​ Jose A. Moreno, director of investor relations at Chr Hansen told​.

"We didn't think that we could add value to our shareholders by acquiring Rhodia,"​ he added, stressing the fact that customers pefer a couple of suppliers, In other words, rolling number one and number two positions into one entity could not be advantageous.

Stabilisers is a further key area for Danisco, with the company late last year announcing a new joint venture for xanthan gum in the burgeoning emerging market of China. Building on the one-stop-supplier philosophy, Danisco linked up with one of the largest xanthan gum suppliers in China, the Henan Tianguan group.

The Danish ingredients group is looking to substantially strengthen its global share of the xanthan gum market - currently dominated by hyrocolloid leader CP Kelco. Rhodia's slice of the hydrocolloid market - xanthan gum, guar gum and locust bean gum - will re-enforce its ambitions.

Terms of the agreement were not agreed but Rhodia said today that the group expects the deal - that concerns over 800 jobs - to go ahead by the end of the second quarter 'after consultations have been held with employee representatives and legal authorisations [from competition authorities] received.'

At the end of last year, the struggling French firm - which posted a first-half loss of €150 million for 2003 - committed to sell €700 million worth of non-core assets by the end of 2004. With the additives alone, it would achieve 30 to 40 per cent of this target. Rhodia, also believed to be looking to shed its core silicones division and parts of its phosphates branch, announced a round of 572 job cuts at its French operations last month.

"The divestiture marks the first step in Rhodia's plans to re-focus its business portfolio and will contribute significantly to debt reduction,"​ the company said today, confirming the full €700 million sell off for 2004.

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