Chr Hansen sale: private equity gains leading colour and culture positions

Related tags Investment

The European Commission gives the all clear for private equity firm
PAI to buy the food ingredients arm of Danish firm Chr Hansen,
writes Lindsey Partos.

PAI, the French firm that for some years has been consolidating its position in the food sector, will pay €1.1 billion for the number one culture maker.

The Commission said yesterday the investigation into the takeover largely focused on "the limited, in number and importance, of vertical relationships stemming form the deal."

Notably the link between Yoplait, controlled by PAI, and Chr. Hansen which affects the downstream market for food dairy products and the upstream market for the production of dairy cultures.

But proof of "alternative and competing sources of supply"​ provided Brussels with the conclusion that "no concerns exist"​ regarding potential, and actual, vertical relationships.

On sale since November 2004, clearance for the deal marks the divergence of Chr Hansen pharmaceutical activities from its food ingredients unit.

The ingredients arm of Chr.Hansen​ came on the market after its major stakeholder, the Lundbeck Foundation, decided to pull away from the ingredients slice of the company to focus on the pharmaceutical unit.

Speaking to recently, the new CEO of Chr Hansen Lars V. Frederiksen says PAI provides a strong financial partner to allow "us to be more aggressive".

"Private equity adds value by investing, to grow margins and cash flow, and to build further,"​ continues Frederiksen, the 25 year-long company member, who last week took the reins from former CEO Erik Soerensen after the latter plumped for early retirement.

According to the new CEO, capital investments are expected in factories, R&D, and marketing efforts. Basically an acceleration of our existing strategies, adds Frederiksen.

At €450 million, last year the ingredients unit contributed the majority of revenue to the group, compared to the €141 million in revenue from the pharmaceutical unit, ALK-Abello, that focuses on allergy treatment and asthma prevention products.

Rumours floating around at the time of sale had suggested that DSM, the Dutch chemicals group, had entered the frame to bid for the ingredients unit. Successsful Irish food group Kerry was also a strong contender.

But the board of directors at Chr. Hansen Holding plumped for PAI partners on the basis of "an overall assessment of price, terms and deliverability,"​claiming its offer was the "most attractive option to the shareholders."

PAI, that recently spun off natural ingredients firm Diana-Ingredients, has made a host of acquisitions in the food sector. Recent deals include the French dairy products company Yoplait, UK biscuits manufacturer United Biscuits for €2.8bn, and €555m for Panzani Lustucru, a pasta sauce specialist.

Indeed, it would seem the stable European food and drink industry, the largest industrial sector in the EU, with a turnover of €799 billion in 2003, is attracting new investors through private equity.

According to a report from 3i, private equity and venture capital invested in Europe's food and drink companies nearly doubled from €2.7 billion in 2001 to €4.5 billion in 2002.

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