DSM Agrees to Buy Kensey Nash in U.S. for $360 Million

Royal DSM (DSM) NA agreed to buy U.S.-based Kensey Nash (KNSY) for $360 million in cash to drive expansion in the market for medical devices and materials engineered from proteins and synthetic polymers.

Kensey Nash’s board is recommending the $38.5-a-share offer, which is 33 percent higher than the company’s close on May 2, Heerlen, the Netherlands-based DSM said today. The purchase should add to earnings from 2013, it said.

The U.S. biomedical company is DSM’s second major purchase in under two years, extending Chief Executive Officer Feike Sijbesma’s refocus of DSM onto value-added products that are less susceptible to economic swings. Kensey Nash, with margins exceeding 30 percent, adds $90 million to DSM’s sales and will provide a base to expand in biomedical equipment following advances in regenerative medicine and tissue engineering.

“It puts DSM Biomedical clearly on the map,” Sijbesma said on a call.

DSM climbed 0.9 percent to 44.23 euros at the open of trading in Amsterdam.

Kensey Nash, a 25-year-old company based in Exton, Pennsylvania, will become part of DSM Biomedical division and help the company meet its goal of 1 billion euros ($1.3 billion) in sales from its so-called emerging business areas. The Dutch company will become one of the largest suppliers of biomedical materials in the U.S. following completion of the deal, expected at the end of the current quarter.

More to Come

Sijbesma, a trained biologist, said that with more than 2 billion euros of cash on DSM’s balance sheet, the search for additional targets will continue as Kensey Nash “doesn’t fulfill all our ambitions.” DSM paid $973 million for health- food ingredients company Martek Biosciences in December, 2010.

DSM spent a year wrapping up its approach on Kensey, and is paying an enterprise value multiple relative to earnings of about 10 times, based on this year’s expected results, rising to 11 to 12 times on next year’s predicted $36 million in earnings before interest, taxes, depreciation and amortization, Rolf- Dieter Schwalb said on the call. Victrex Plc (VCT), a rival supplier of biomaterials for medical implants, is currently valued at 10.16 times, according to Bloomberg data.

“In acquisitions in the highly innovative fields we sometimes might have to pay slightly higher multiples but the growth of the business and growth of profitability is so strong,” Schwalb said.

Citigroup advised DSM on the Kensey Nash deal, with Cleary Gottlieb Steen & Hamilton providing legal counsel. Jefferies advised Kensey Nash, with Katten Muchin Rosenman serving as legal counsel.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

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

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