Penford is a U.S.-based leader in specialty ingredients for food and non-food applications, and the move is an effort by Ingredion to strengthen it’s specialty ingredient portfolio.
The acquisition has been approved by the boards of directors of both companies. However, it is still subject to approval by Penford’s shareholders and regulators as well as to other customary closing condition Nonetheless, the deal could close as early as the end of the year.
“This acquisition is another step in executing our strategic blueprint for growth,” says Ilene Gordon, Ingredion chairman and ceo. “It expands our higher-value specialty portfolio, establishes manufacturing of specialty potato starches in North America, and builds our presence in nature-based hydrocolloid ingredients.”
Gordon adds that Penford’s products address growing consumer trends, including nutrition, gluten-free, food textures, and sustainable green solutions.
“The added capabilities will further enhance our efforts to deliver new, value-added solutions to the marketplace,” she says.
Thomas Malkoski, president and ceo of Penford, says the deal is a tremendous opportunity to combine Penford’s and Ingredion’s complementary product portfolios and capabilities.
“Ingredion is a recognized innovator in food ingredients and sustainable green solutions,” he explains. “The expanded portfolio and geographic reach of the combined company will enable new and exciting solutions for their customers and ours.”
A leader in specialty ingredients, Penford had net sales of $467 million in fiscal year 2013. The company supplies a broad range of texture solutions for food, including customized combinations of texture ingredients with a particular emphasis on potato starches.
Penford’s starch-based products for non-food applications include sustainable, nature-based solutions designed to replace synthetic ingredients.
With approximately 445 employees, Penford operates six plants in the United States, all of which make specialty starches. Its headquarters are based in Centennial, Colo., near Denver.
"We are confident that this acquisition will create long-term value for our shareholders," Gordon says.
The transaction is expected to generate annual cost synergies of at least $20 million, primarily from efficiencies in the areas of manufacturing, procurement, logistics and general and administrative functions.
"We will move quickly to integrate the businesses, attain synergy savings and provide a broader offering of higher-value specialty products to our customers around the world," Gordon adds.
The purchase price represents a synergy-adjusted EBITDA multiple of approximately seven times on an enterprise-value basis. Excluding one-time costs, in the first year the transaction is expected to be $0.10 – $0.15 accretive to earnings on a per share basis. J.P. Morgan is acting as financial advisor to Ingredion and Sidley Austin LLP is acting as legal advisor.
Ingredion is a leading global ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients.
With customers in more than 100 countries, Ingredion serves approximately 60 diverse sectors in food, beverage, brewing, pharmaceuticals and other industries. For more information, visit ingredion.com.