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Danisco Acquires Finnish Processor Cultor While Trying to Sell Off Frozen Operations.

Danisco, the Danish food conglomerate, is apparently trying to get out of the frozen food business. The company announced on March 1 that it will take over Finnish sugar and food conglomerate Cultor.

The acquisition fits with Danisco's long term strategy of concentrating on the core areas of sugar/sweeteners, food ingredients and packaging. Besides frozen foods, Danisco has put its alcoholic beverage production and licensed distribution up for sale, although without a time limit, since the company is strong enough to continue operating the peripheral units.

The Cultor deal was valued at DKK 9.5 billion (approximately $142 million). Stock analysts reacted positively to the price, despite the fact that it was just over double Cultor's market value. Danisco CEO Alf Duch-Pedersen expects to see group revenues of around DKK 30 billion, of which Cultor will account for slightly more than one-third of the total. Sugar operations, which hold virtually the entire Swedish and Danish markets, provide around DKK 9 billion of the total turnover. The unit has sugar production in Germany and will now have a commanding share of the Finnish market. The Ingredients division accounts for around DKK 7 billion and annual sales from the packaging unit, Danisco Flexible, total around DKK 4 billion.

Danish newspapers speculate that Danisco Foods, the country's largest producer of frozen vegetable products, will land in foreign hands. The unit has by far the lion's share of the frozen vegetable market for private label in Denmark, and the Mette Munk brand. It also has export activities in most o:f Europe, either through its Frigodan label, Mette Munk or the various labels of Groko and Fri d'Or, two companies it took over around three years ago in part of an expansion strategy.

Danisco Foods and other units that are on the block log annual sales of around DKK 7 billion. Food accounts for around DKK 2.3 billion of the sum. The alcoholic beverage segment, Danisco Distillers, has annual turnover of DKK 1.2 billion. Two prospective buyers would be the British companies Allied Domecq and United Distillers, both have had cooperative relationships with Danisco. Danisco Pack, a producer of corrugated cardboard packaging, has annual sales of around DKK 3.3 billion. Danisco also has a fish fodder business that turns around DKK 2.1 billion in sales and a livestock fodder unit that sells around DKK 1.4 billion annually.

Sugar operations account for around 15% of Cultor's annual turnover of approximately DKK 10.6 billion. The Nutrition segment has around the same turnover figure. Cultor's EWOS is the second largest producer of salmon fodder, delivering to farms in Norway, Canada, the UK and Chile, among others. Suomen Rehu is the largest domestic producer of cattle fodder in Finland.

The merged ingredients segments of the two companies will create the largest player in the world, with a broad range of industrial product . Cultor Food Science is headquartered in the US and is a major developer of food additives. Cultor is also the largest producer of the sweetener, xylitol. Cultor Fodder Ingredients is the leader in fodder enzymes and the growth stimulant betain. The Finnish company also co-owns with Eastman Chemicals of the US, on a 50/50 basis, Genencor International the world's second largest producer of industrial enzymes.

Dansico-Cultor holds a 25% share of the world market for industrial enzymes. Another Danish company, pharmaceutical group Novo Nordisk, holds 45% of the same market.

The Belgian sugar producer, Finasucre, is the largest shareholder in Cultor, with 18.35% of the equity and 26.9% of the vote. Other major shareholders include Finnish sugar beet producers and institutional investors. The bid was given directly to shareholders controlling 44.7% of the vote in the company.
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Publication:Quick Frozen Foods International
Date:Apr 1, 1999
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