Danisco results may influence stockholders over DuPont offer

By Jess Halliday

- Last updated on GMT

Related tags: Dupont, Percentage point, Danisco

Danisco’s fine Q3 results may make some investors less willing to sell, believing the company can bring profit alone or that DuPont may be persuaded to raise its offer, say commentators.

The Danish biotech firm reported group revenue of DKK3.9bn, against DKK3.3bn for the same period of last year. Food ingredients contributed DKK2586m, compared to DKK2518m in Q3 2009/10. Nine percentage points of the growth were organic.

The company’s board has recommended shareholders accept an offer from DuPont on 10 January to buy outstanding shares in Danisco for DKK665 each. No other potential bidder has approached Danisco since that date.

However the deadline has already been shifted once, said to be because DuPont had not received the necessary approvals and clearances from competition authorities in the EU and in China.

Hydrocolloids expert Dennis Seisun of IMR International said Danisco’s results are both good and bad: “Some investors holding large positions in Danisco, feel the company is worth more than is being offered by DuPont.”

Michael Jorgensen, Alm Brand analyst also said the results could make people less inclined to sell and lead them to believe that Danisco itself can create value in the longer run, according to Reuters.

For the deal to go through at least 90 per cent of stockholders need to accept the bid.

Seisun said that if a minimum of 10 percent of stockholders vote against it, the transaction may still go through but with some limitations. If more than 20 per cent are against it, however, the deal would most likely need to be renegotiated.

Meanwhile, DuPont CEO Ellen Kullman has said that the Q3 results do not give grounds for raising the offer, as they were in line with expectations based on due diligence. "Our tender offer remains full, fair, and firm,”​ she said in a statement.

Meanwhile Reuters has also reported Danisco CEO Tom Knutsen as raising the “very likely scenario” ​that the offer period would be extended by another four week.

Commenting on the Q3 results, Knutsen said Sweeteners are now back on track, new earnings levels were reached in Genencor and Cultures and an exceptional peak cycle performance in Enablers.

He warned that that Enablers are now entering a new and more challenging phase due to substantial raw material price inflation.

However he said: “Based on our preliminary planning for 2011/12 and using the prevailing exchange rates, we see revenue growth for the Group of around 6-7 per cent in 2011/12 and a stable EBIT margin (after share-based payments) of around 15 per cent (corresponding to around DKK 2.5 billion), reflecting a margin decline in Enablers and margin improvements for the remaining divisions.”

This reiteration of long term outlook is important, and is seen by Kullman and analysts as a more accurate measure than just one set of quarterly results.

The company says it is “continuing to optimise our organisation be removing unnecessary complexity and focus on what matters to our customers”.

In particular, it remains focused on broad themes for innovation and sustainability to meet global challenges in food, energy and chemicals.

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