DSM Chief Seeks Purchases in Personal-Care Chemicals

Royal DSM NV, the world’s largest maker of vitamins, plans to branch out into personal-care chemicals with purchases and factory expansions to tap demand for moisturizer ingredients.

DSM’s focus is on ingredients for skin- and hair-care, Sijbesma said. The company currently gets 200 million euros ($270 million), or less than 3 percent of its annual sales, from polymers and vitamins used in personal-care products.

“We’re still small in that area,” Chief Executive Officer Feike Sijbesma said in an interview in London yesterday. “We want to grow that both organically and through acquisitions.”

The 10 billion-euro market for products used in hair gel to sunblock is forecast to outpace growth of 3 percent to 4 percent in the global economy, the CEO said. Demand in the personal-care industry held up better than commoditized products during the economic slump, attracting global chemical companies.

DSM joins Dutch paintmaker Akzo Nobel NV in seeking to expand in the market. BASF SE’s planned purchase of Cognis for 3.1 billion euros, due to be completed in December, sparked speculation other suppliers including Croda International Plc and Air Liquide SA’s Seppic unit may be snapped up.

“The personal-care sector has attracted increasing attention,” said Peter Hall, a partner at Valence Group, which advises chemical companies on deals. “Anything that becomes available in this sector will be heavily pursued.”

Photographer: Nelson Ching/Bloomberg

Royal DSM NV Chief Executive Officer Feike Sijbesma said DSM’s focus is on ingredients for skin- and hair-care. Close

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Photographer: Nelson Ching/Bloomberg

Royal DSM NV Chief Executive Officer Feike Sijbesma said DSM’s focus is on ingredients for skin- and hair-care.

Profit Goals

Deal sizes in the chemicals industry are moving back toward larger transactions, and so far this year the tally for mergers and acquisitions stands at $27.6 billion, according to a Nov. 4 report by PricewaterhouseCoopers.

Lubrizol Corp., Rhodia SA, Stepan Co. and International Specialty Products are among the largest suppliers of personal- care chemicals.

“Few of the larger players are going to exit this sector any time soon,” Valence’s Hall said. “Attention will focus on the high value, well-managed stand alone businesses, with Croda being an outstanding example.”

Sijbesma, a trained biologist, is looking for new products and markets to help DSM meet sales and profit goals and lift its share price. The company, which also supplies food products to Unilever Plc and other foodmakers, aims to double earnings before interest, taxes, depreciation and amortization to 1.6 billion euros by 2013.

Plaudits

“I would certainly applaud a move towards personal care,” said Mark van der Geest, an analyst at ABN Amro. “The No. 1, No. 2 and No. 3 priorities for DSM now are to grow. They can do that by looking at adjacent businesses.”

DSM shares added 0.8 percent to 39.12 euros today. They have climbed 13 percent in Amsterdam trading this year, valuing the business at 7.4 billion euros. That compares with a 78 percent jump at Croda, the U.K. supplier of sun-block agents to Procter & Gamble Co., which is valued at 2 billion pounds ($3.2 billion). Croda soared 2.4 percent to 1,422 pence today.

Sijbesma this year divested fertilizer, melamine and citric acid operations with a combined revenue of at least 650 million euros. He’s also seeking to divest elastomers, its remaining commodity chemical business.

The CEO orchestrated the 1.75 billion-euro of Roche Holding AG’s vitamins and fine chemicals unit in 2003, and he is now at the helm of a company with next-to-zero debt and cash of 1.9 billion euros.

“Personal care has a stabile growth and higher margins,” said Van der Geest, who has a “hold” rating in DSM stock. “You’re up higher in the chain, closer to consumer goods makers like L’Oreal SA, which have higher margins.”

To contact the reporter on this story: Jeroen Molenaar in Amsterdam at jmolenaar1@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net

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