June 28, 2011
Provimi attracts international bidders
Provimi has attracted several international bidders including Nutreco, Royal DSM NV and Cargill, in the first round of an auction.
Dutch rival Nutreco NV and Dutch life and materials sciences company Royal DSM NV submitted bids earlier last week, according to a source familiar with the situation. Chinese agriculture firm New Hope Group Co. and US-based Cargill Inc. also put in bids, according to press reports.
The sale is being run by JPMorgan Chase (JPM) and second round bids are due at the end of July.
Based in Rotterdam, Provimiposted profit before tax of EUR65.1 million (US$93.1 million) on sales of EUR1.6 billion (US$2.3 billion) for the year ended December 31, 2010.
The company has been valued at up to EUR1.8 billion (US$2.6 billion) which could deter the Dutch bidders. Analysts say that Nutreco can only pay a maximum price of EUR1.3 billion (US$1.9 billion), while market observers see the strategic rationale of DSM buying Provimi but question the price.
Like Provimi, DSM produces ingredients and additives for animal feed, but acquiring Provimi would enhance its exposure to emerging markets, such as India, Brazil and Russia, where Provimi has a strong position.
After the acquisition of US nutrition company Martek Biosciences for US$1.09 billion in cash in December last year, DSM said its cash position of over EUR2 billion (US$2.9 billion) allows it to do other large acquisitions with a similar size as Martek.
DSM''s enterprise value/earnings before interest, tax, depreciation and amortisation, or Ebitda, ratio stood at six at the end of 2010, compared with 11.7 for Provimi if sold for EUR1.8 billion, making the price excessive, a KBC Securities analyst said.
In addition, the acquisition would have a dilutive effect on DSM''s margins given Provimi''s Ebitda margin of 9.5% in 2010, compared with 23.4% for DSM''s nutrition division.