EI DuPont de Nemours & Co.’s(DD) proposed acquisition of Danisco A/S has received approval from the European Commission (EC) under the European Union Merger Regulation. The wholly owned and fully controlled subsidiary of DuPont, DuPont Denmark Holding ApS had announced the takeover of the outstanding shares of Danisco at a price of DKK 665 in cash per share in January 2011.
Apart from one Chinese approval that is still pending, the company has obtained all the major regulatory approvals required for the acquisition. The formalities for the Chinese approval are being carried out. DuPont remains optimistic that Danisco shareholders will follow their board’s recommendation to accept its premium cash offer, and the transaction will be completed later this month.
The acquisition fits in well for DuPont and provides a number of growth opportunities especially in the food and energy sector. Danisco’s business portfolio complements that of DuPont’s. Danisco has a strong R&D pipeline, and its specialty food ingredients offer long-term financial returns to DuPont. The deal is in line with DuPont’s strategy to expand beyond its chemical and manufacturing focus into the mega trend sectors of agri business and alternative energy. Both the industries are expected to grow rapidly in the coming years as food demand and prices increase and clean energy policies gain more ground.
DuPont is a science-based products and services company, ranking sixth in crop protection chemicals and second in seeds. The company continues to execute its strategy of enhancing its offshore reach, expanding its presence in newer chemical technologies and shoring up agricultural operations. The company spent approximately $637 million for acquisitions supporting its Agriculture and Safety and Protection Services businesses in 2010, as well as $1.6 billion on capital expenditures. Additionally, DuPont plans to spend $1.8 billion in capital expenditures in 2011.
Net earnings of the chemical giant plunged 14.7% to $376 million or 40 cents per share in the fourth quarter of 2010 compared with $441 million or 48 cents per share in the prior-year period. Reported earnings, however, were ahead of the Zacks Consensus Estimate of 32 cents per share.
Quarterly revenues grew 15% to $7.4 billion on a 12% volume gain, driven by higher international sales and a 6% rise in selling prices. Sales exceeded the Zacks Consensus Estimate of $6.9 billion.
DuPont faces stiff competition from The Dow Chemical Company (DOW) and Ashland Inc.
Currently, DuPont has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Outperform recommendation.
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