Novozymes to buy EMD/Merck Crop BioScience

By Mette Fraende

COPENHAGEN (BestGrowthStock) – Novozymes (NZYMb.CO: ), the world’s top industrial enzymes maker, is buying U.S. based EMD/Merck Crop BioScience for $275 million from Merck KGaA (MRCG.DE: ), boosting its presence in the fast-growing agricultural biotech segment.

But EMD/Merck Crop BioScience, a leading developer of natural inoculants used by farmers to improve plant health and crop yields, did not come with a cheap price tag, analysts said.

“It is not cheap, but they are buying a company with very high growth, and they are paying for that,” Sydbank analyst Morten Imsgaard said.

“The acquisition is well in line with Novozyme’s plans to grow that part of the business. It is a very good match with their existing business and it will contribute to grow that division massively,” Imsgaard said.

The company had an average annual growth rate of about 15 percent over the last seven years and expects 2010 sales of about $60 million, it said. Its EBIT margins were supportive of Novozymes’ long-term expectations of more than 20 percent, it added.

“Strategically it is an important acquisition. They will get distribution in the U.S. and South America as well as a pipeline,” said analyst at ABG Sundal Collier, Frans Hoyer.

“But such a deal is expensive. But they are paying for the growth,” Hoyer said.

EMD/Merck Crop BioSciencE’s products are applied to crops, including soybean, pulse crops, forage crops, peanuts, corn, and wheat, and sold in the U.S., Canada, Argentina, and Brazil, Novozymes said in the statement.

“The acquisition strengthens our presence in the growing field of agricultural biologicals, and the complementary business of EMD/Merck Crop BioScience’s has a strong strategic fit with our existing BioAg business,” Steen Riisgaard, President & CEO of Novozymes said in a statement.

“Sustainable products and technologies will in the future play an even greater role in the agricultural industry as they allow effective and more sustainable ways to grow crops.”

The deal would have no impact on Novozymes’ latest 2010 sales and earnings guidance as communicated on October 28, 2010.

On October 28, Novozymes said it expected full-year 2010 sales to grow by 12 to 13 percent in Danish crowns and EBIT to grow this year by 24 to 25 percent.

The actual takeover date was uncertain, but could be as early as February, but also as late as May, depending on regulatory approvals, the company said.

Regardless of the acquired sales impact for 2011, Novozymes expected EBIT for the transaction to be around zero due to the unpredictable takeover date, it said.

Shares in Novozymes initially traded down, but recovered to trade up 1.0 percent at 0823, outperforming the benchmark OMXC20-index which was negative.

(Reporting by Mette Fraende; Editing by Louise Heavens and Jon Loades-Carter)

Novozymes to buy EMD/Merck Crop BioScience