BASF SE (BAS), the world’s largest chemicals company, agreed to buy Pronova BioPharma ASA (PRON) for 3.76 billion kroner ($654 million) to gain a leading position in Omega-3 fatty acids used in drugs and health foods.
BASF is offering 12.50 kroner in cash for each share of Lysaker, Norway-based Pronova, the German company said today. The bid is 4.2 percent higher than yesterday’s close. Pronova rose 4.6 percent to 12.55 kroner at 10:56 a.m. in Oslo. Including debt, the Ludwigshafen-based chemical maker’s deal values Pronova at 4.85 billion kroner.
The purchase would add higher-grade Omega-3, used in medicines for cardiovascular diseases, to ingredients for dietary supplements that BASF gained with the purchase of Scotland’s Equateq in May and the acquisition of Cognis in 2010. Chief Executive Officer Kurt Bock is boosting the company’s share in nutrition and health, a market estimated to grow to 81 billion euros by 2015 that is sought after by rivals such as Royal DSM NV (DSM) and Croda International Plc. (CRDA)
“It looks like a very nice growth market,” said Ulle Woerner, a chemical analyst at Landesbank Baden-Wuerttemberg. “The business is very profitable, and if you look at the growth it’s not a bad price.”
The purchase price gives Pronova an enterprise value of 4.85 billion kroner, which is 5.7 times earnings before interest, tax, depreciation and amortization over the last 12 months, BASF said.
Pronova, which posted sales of 214 million euros ($274 million) and ebitda of about 90 million euros last year, has one blockbuster product sold as Omacor by Abbott Laboratories and as Lovaza by GlaxoSmithKline Plc, BASF said. The Norwegian company also has a production site in Denmark.
DSM earlier this month agreed to buy Fortitech of the U.S., a maker of ingredients for infant nutrition and dietary supplements, for $634 million. The purchase follows about 1.8 billion euros in takeovers by DSM to expand in nutrition. Croda said in April it was talking to potential takeover targets and has cited expansion in nutrition and drug ingredients as a goal.
BASF’s purchase, to be completed in the first quarter of 2013, has been approved by Pronova’s board of directors and will be financed with cash on hand, the German company said. Herkules Private Equity, Kistefos AS and Kistefos Investment AS, investors which own about 60 percent of Pronova’s stock total, have said they will accept the offer, BASF said, adding the commitments are “irrevocable.”
Bock, who has held the top job for about 18 months, is shifting BASF toward additives for health foods and other higher-margin specialty chemicals to help shield the company from economic swings. The market for omega-3 concentrates is expected to grow 8 percent a year on average between 2011 and 2020, BASF said.
“The intended acquisition will significantly strengthen our position in the fast-growing and highly profitable market for omega-3 fatty acids,” BASF board member Michael Heinz said in the statement. The market is “driven by an increasing consumer awareness of omega-3 fatty acids health benefits,” BASF said.
BASF declined as much as 0.8 percent to 65.29 euros in Frankfurt trading. The stock has gained 22 percent this year for a market value of 60.3 billion euros.
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