BASF to Buy Fish Oil Maker Pronova in $845 Million Deal
Germany's BASF is buying a maker of fish oils used in heart drugs and food supplements for an agreed $845 million, seeking steady growth in nutrition markets to complement its more volatile chemicals and plastics businesses.
The deal with Norway's Pronova BioPharma is the latest in the nutrition sector, a rare beacon of growth in consumer markets suffering from a faltering global economy.
German rival Bayer on Tuesday withdrew its interest in U.S. vitamin maker Schiff Nutrition following a higher bid from Reckitt Benckiser.
Shares in Pronova, which supplies the omega-3 heart medicine Lovaza to GlaxoSmithKline, jumped to a high of 12.7 Norwegian crowns in early Wednesday trading, above BASF's offer of 12.5 crowns and signalling investors' hopes for a higher bid.
However, BASF said it had the support of Pronova's management and binding commitments covering about 60% of Pronova's share capital, including the 50% held by Herkules Private Equity Fund.
Herkules' endorsement of the bid, which offers a 24% premium to Pronova's average share price for the past six months, was lukewarm. But it played down the possibility of a higher offer.
"The premium is a bit low but all in all, we are satisfied. This is still the best solution for shareholders," Herkules Managing Partner Gert Munthe said.
"The process was initiated by Pronova. It is not likely there would be a higher bid. We have been in dialogue with other players and this is the best we could come up with," he added.
The deal values Pronova at 4.845 billion Norwegian crowns ($845 million), including around 1.085 billion of debt.
That is about 5.7 times Pronova's annual earnings before interest, tax, depreciation and amortisation (EBITDA), less than the multiple of more than 9 that Dutch group DSM paid this year for fish oil extract producer Ocean Nutrition Canada.
For BASF, "the deal is very favourable in our view," said Norbert Barth, an analyst at Baader Bank.
"The offer looks not very attractive to free shareholders, (but) the takeover may be successful, as BASF has already commitments of about 60% of the share capital," he added.
BASF has been buying into industries less exposed to economic fluctuations than its core chemicals and plastics operations, which cater to builders, carmakers and electronics companies.
Its existing nutrition and health business had €1.48 billion in revenue in the first nine months of 2012, accounting for 2.5% of group sales.
In May, it agreed to buy Equateq, a British maker of concentrated omega-3 fatty acids, for an undisclosed sum.
The Pronova deal, which BASF plans to finance from available funds, is subject to a 90% acceptance threshold among Pronova shareholders.
The detailed offer will be sent to Pronova's shareholders around Dec. 5. BASF expects to close the transaction in the first quarter of 2013.