June 20, 2011

DSM cautious of merger and acquisition deals that require carving up



DSM is wary about acquisitions that it would have to carve-up to extract the businesses it wants to compensate for currency costs at its nutrition unit and increase its product mix.


DSM bought US baby food ingredients maker Martek for US$1.1 billion in February and is sitting on a war chest of more than EUR2 billion (US$2.8 billion). It has repeatedly said it is on the lookout for suitable acquisitions.


"What is DSM going to spend its money on? There are multiple options," said Stephan Tanda, DSM's board member responsible for the nutrition unit. "I'm not saying there is plenty to buy, but the deal flow is sufficient that we are busy."


Investment bankers consider French animal feed group Provimi - which is up for sale - is a possible target and when asked about it, Tanda said that some parts of Provimi would be a good fit, but that other parts were of "no interest" to DSM.


He declined to say whether DSM would bid for Provimi.


"They are active in very different areas - compound feed, complete feed. That's not an area of interest to us. Do they have some premix plants we would be interested in if they were up for sale by themselves? Certainly," Tanda said.


He declined to say whether DSM might bid with a partner for Provimi.


On other possible targets, Tanda said DSM liked parts of US specialty chemicals group ISP but added that there was a lot of pain involved when it comes to carving up acquisitions.


ISP was bought by Ashland in May for US$3.2 billion.


A Dutch newspaper reported that Dutch animal feed peer Nutreco was mulling a bid for Provimi and Tanda said such a scenario could also prove positive for DSM.


"Nutreco is a large customer of ours. It is always good if you have a large customer," he said. "It is not as though we compete with each other every day on a fierce basis because you have different geographic spread, a different offering."

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