Bloomberg News

DSM Buys Animal-Nutrition Supplier Tortuga for $576 Million

August 08, 2012

Royal DSM NV (DSM), the world’s largest vitamin maker, agreed to acquire Tortuga of Brazil for 465 million euros ($576 million) to bolster its animal-nutrition business with dietary supplements for beef cattle.

The price may increase to 490 million euros depending on Tortuga’s earnings performance this year, Heerlen, the Netherlands-based DSM said today. Sao Paulo-based Tortuga is forecast to report 60 million euros in earnings before interest, taxes, depreciation and amortization this year, implying a multiple of 7.75 times. That’s in line with typical multiples for that market, according to Kepler Capital Markets.

DSM said the transaction will give it a stronger foothold in the “highly attractive” animal-nutrition market in Latin America. It also extends the company’s move into higher-margin products. Adding Tortuga’s range of vitamin and mineral supplements will enable DSM’s nutrition cluster to pass the 4 billion-euro mark in sales and the company still has an acquisitions warchest of more than 1 billion euros, Chief Executive Officer Feike Sijbesma said today.

“If we can continue we will as this is a very attractive field,” Sijbesma told journalists on a call.

DSM shares rose 0.6 percent to 39.38 euros at 9:06 a.m. in Amsterdam.

Milestone

Tortuga is an “important milestone for DSM,” strengthening its position in the cattle supplement market that’s worth more than 4 billion euros and growing by about 3 percent a year, said Leendert Staal, head of DSM Nutritional Products. It is DSM’s second-biggest purchase in five years and will make the company one of the top producers of chelates, organic trace minerals that are given to ruminates.

DSM yesterday announced plans to cut 1,000 jobs across its European operations making plastics and other products that are suffering from higher raw-material prices and subdued demand, as well as competition from new entrants in Asia. Second-quarter Ebitda fell 14 percent.

By contrast, the animal-feed industry has attracted food companies including Cargill Inc., which bought additives maker Provimi from Permira Advisers LLP for $2.2 billion a year ago. DSM had also pursued that asset. Archer Daniels Midland Co. (ADM:US) bought liquid animal-feed supplement maker Loomix from Cattleman’s Choice. Terms of that deal weren’t disclosed.

The Tortuga purchase will be immediately earnings accretive, DSM said in a statement. There is potential for “strong” sales synergies as Tortuga’s chelates business has so far been largely restricted to Latin America and cattle feed will complement DSM’s poultry and swine products, Stefan Tanda, who oversees DSM’s nutrition cluster, said on the call. There are also back-office savings to be made by merging Tortuga with DSM, Tanda said, declining to be specific.

To contact the editor responsible for this story: Andrew Noel at anoel@bloomberg.net


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