CSM plans to divest bakery supplies businesses

by Jeff Gelski
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DIEMEN, THE NETHERLANDS — CSM n.v. will begin a major divestment process for its North American and European Bakery Supplies businesses and plans to transform into a bio-based ingredients company with focus on its Purac and Caravan Ingredients businesses, Diemen-based CSM said May 7. CSM said it expects to have made significant process with the intended divestments by early 2013.

“Given that the current environment is expected to lead to further industry consolidation, they are likely to be of greater value to another owner, and to be better positioned to participate in that consolidation,” CSM said of the bakery supplies businesses.

CSM said it intends to balance the net proceeds from the divestments to support and enhance growth opportunities available to the bio-based ingredients business, to reduce the debt to a level suitable for its size and activities, and to distribute funds to shareholders.

The Bakery Supplies businesses that CSM plans to divest had sales in 2011 of €2,409 million ($3,142.5 million), EBITDA before central costs and one-off costs of €127.5 million ($166.3 million) and EBITA before central costs and one-off costs of €86.3 million ($112.6 million). CSM said it expects to have made significant process with the intended divestments by early 2013.

The combination of Purac and Caravan Ingredients will supply bio-based ingredients for preservation, nutrition, fortification and stabilization and will serve end markets in food, chemicals and polymers. The combination will target growth opportunities in new lactic acid applications such as bio plastics, animal health and nutrition, as well as next generation, bio-based alternatives for oil-based materials.

Combined, Purac and Caravan Ingredient in 2011 had sales of €704 million ($918.6 million), EBITDA before central costs and one-off costs of €123.5 million ($161.5 million) and EBITA before central costs and one-off costs of €93 million ($121.3 million).

Purac, a biotechnology company involved in lactic acid and its derivatives, is leveraging its fermentation capabilities to expand beyond lactic acid into other bio-based alternatives for petrochemically-based products.

Caravan Ingredients is involved in the North American market in such specialty ingredients as lactic acid-based emulsifiers, functional blends containing enzymes, and fortification ingredients. About 40% of the company’s sales are in non-bakery applications in both food and non-food markets.

“The transformation envisaged in today’s announcement would be a major step in the group’s strategic development,” said Gerard Hoetmer, chief executive officer of CSM. “We intend CSM to be a focused, bio-based ingredients company, with strong financial performance and exciting growth prospects that should generate attractive total returns to shareholders.

“While bakery supplies is a well-run business with excellent market positions, its value and prospects would be enhanced under different ownership. I understand that employees in particular will face a period of uncertainty, and I highly appreciate their continuing efforts and dedication, as has always been the case.”

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