Danisco to further explore splitting company

by Jeff Gelski
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COPENHAGEN, DENMARK — Danisco in the future may split into two companies, one for ingredients and the other for sugar, but the timing at the moment is not right, said Anders Knutsen, chairman of the board of directors, during an annual general meeting Aug. 29.

Mr. Knutsen gave two reasons for rejecting a proposal to split Danisco into two separate companies. One, it is not possible to make a definite valuation because the nature of the European Union sugar reform is not clarified yet. Two, more value-creating solutions than splitting the company may turn up once the valuation becomes more definite.

"Developments in recent years have supported the view that Danisco’s shareholders would benefit from separating the company into two independent companies: an ingredients business and a sugar business," Mr. Knutsen said. "We agree that the proposed model is workable but that the timing is wrong. We need time to gain an overview to ensure the best result.

"The board will therefore continue to work for Danisco Sugar’s independence. With two independent companies we will ensure the best future development opportunities while at the same time enabling the shareholders to target their investments at either a global ingredient business and/or a European sugar business."

Under this strategy, the basic aim must be to obtain an independent listing of Danisco Sugar, Mr. Knutsen said.

"This does not rule out other solutions offering more perspective and value creation, for instance that the sugar division becomes part of a conglomerate tying growers and sugar production closer together or by taking active part in a consolidation of the European sugar industry," he said.

He said the effects of the E.U. sugar reform on the industry’s structure should be known in one to two years.

"This is exactly the time frame we have set for changing the ownership structure of the sugar business," Mr. Knutsen said.

For Danisco in the 2006-07 fiscal year, Sugar accounted for 34% of revenues and Ingredients accounted for 66%. Ingredients sales rose 5% to DKK13.64 billion ($2.46 billion) in the fiscal year ended April 30.

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