Chr Hansen ingredients unit up for sale

The move has evolved out of discussions over the past three years to separate the Danish group into two independent listed companies, an ingredient and an allergy vaccine company.

But the primary shareholder in Chr Hansen, the Lundbeck Foundation that has its roots in the pharmaceutical business, has since informed the group's board that it does not wish to be a long-term strategic shareholder in the ingredients company.

As such, the board of directors at Chr Hansen said they have "entered into an agreement with the investment banker Carnegie Bank to investigate the possibilities for a divestment of the ingredients sector"​.

The ingredients operations of Chr. Hansen include cultures, enzymes, colours - where it is the number one natural colour supplier - flavours, seasonings and sweeteners. Industry players with the clout to acquire Chr Hansen may well meet with competition concerns. As such, observers could suspect the group will be broken up into units.

In recent years, increasing competition in the saturated western market has meant struggle for the company's operation there. On the contrary, a strong performance from its operations in Asia Pacific, have been particularly buoyed by the major success of its cultures division in China, which has expanded exponentially, in line with the growth of the dairy industry there.

But the CEO of Chr Hansen, Erik Soerensen said that this is definitely not the case: "The ingredients business will not be split up, it is all or nothing."​

Providing opportunities for cash rich, ambitious firms, either within or external to the food industry, the roll call of ingredients players on the market keeps on growing, largely against the backdrop of increasing consolidation in the food industry.

The retailers are extending their reach across the globe, and ingredients suppliers are under severe pressure - notably through squeezed margins - to keep up with the pace and to deliver products at competitive prices. Consolidation and economies of scale are one of the only routes open to them.

Last week the ingredients unit at Chr Hansen announced an 8 per cent increase in revenue for the year to DKK 3.4 billion, up from DKK3.34 billion on the previous year. The ALK-Abello allergy unit pulled in sales of DKK 1.05 billion, a rise from DKK 991 on the previous year.

The market welcomed the news of the divestment this morning with Chr Hansen's share price on the Copenhagen stock exchange spiking more than 13 per cent to DKK645 at 11.22am today.