What is in this article?:
Deal is significant news for the global nutritional ingredients market because it represents DSM’s largest nutrition investment since the company purchased Roche’s vitamins and fine chemicals division in 2002. Perhaps more significantly, it adds to the competition and complexity of the global omega-3 market.
What is in it for DSM?
Adding Martek to its Life Sciences portfolio gives DSM the diversification it needs within the nutrition market. Market analysts praised the acquisition for its fair price and sound strategic rationale. Wrote J.P.Morgan Cazenove: “We view the deal as fully in line with DSM's strategy of accelerating growth in its Life Sciences franchise, while addressing market concerns over the long-term sustainability of its profitability in vitamins.”
DSM currently sells a fish-based omega-3 ingredient called Ropufa, but Martek will enable it to move into the growing vegetarian omega-3 market.
The acquisition also gives the company more ammunition to compete in the evolving and highly competitive global omega-3 market. “We felt this was the time to do the deal,” Tanda said. “Martek is fairly unique and highly differentiated.”
Martek owns approximately 350 patents, one of which will expire in 2011 and one in 2014. Tanda said the expirations didn’t deter DSM from the deal. “DSM also has significant intellectual property in this area,” he said. “The combination of Martek and DSM will ensure that these products are competitive for a long time to come.”
Analysts were particularly pleased with the price DSM is paying for Martek. “DSM is not overpaying,” wrote RBS analyst Mutlu Gundogan. “We believe that one of the reasons why DSM’s shares have traded at a discount versus the sector was that the market feared it would do a value destroying acquisition, which they today show is not the case.”