Dutch chemicals group DSM said on Tuesday it would buy Martek Biosciences Corporation for $1.087 billion (829 million euros) in cash to specialize further in the niche food nutrition industry.
DSM has been repositioning itself in recent years away from bulk chemicals to focus on niche life sciences and materials sciences and last week completed its divestment program, saying it had a war chest of 2 billion euros for acquisitions.
DSM said its offer price of $31.50 per Martek share represents a 35 percent premium to the U.S.-based company's closing share price on Dec. 20 and that Martek's board of directors is recommending the offer to shareholders.
The world's largest vitamins maker said the deal gives DSM a new growth platform for natural, healthy polyunsaturated fatty acids nutrition ingredients, adding that Martek is a global leader, especially in infant formula nutrition.
"This acquisition is an attractive and logical next step for DSM. Martek's leading position in healthy, natural ingredients and algal technology will add a new growth platform to our Nutrition business," said Chief Executive Feike Sijbesma, a medical biologist and business management graduate.
Martek had annual net sales of $450 million for its fiscal year which ended Oct. 31, 2010 and estimated earnings before interest, tax, depreciation and amortization (EBITDA) of $115 million to $120 million.
Based on the agreed acquisition price of $1.09 billion, DSM is paying about nine times estimated EBITDA.
Analysts have previously said DSM could become a takeover target if it does not make a large acquisition soon and the deal, DSM's first major buy after its divestment scheme, will be funded by DSM's existing cash.
The tender process is expected to start between Jan. 10, 2011 and Jan. 25 and close in February, while the deal is expected to close in the first or second quarter of 2011.
It is subject to the tendering of at least a majority of Martek shares and antitrust approval in the United States and other regulatory approvals.
DSM said the acquisition is immediately earnings per share accretive for DSM by 15 to 20 euro cents on a full-year basis. The acquisition is expected to realize material revenue synergies.
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