DSM Buys Food-Additive Maker Fortitech in $634 Million Deal

Royal DSM NV said it agreed to buy Fortitech of the U.S. in a $634 million cash deal to expand its bespoke food-ingredient business.

The purchase, expected to close this year, will add to earnings in the first full year, the Heerlen, Netherlands-based company said in a statement. DSM is paying a multiple of about 9.06 times earnings before interest, taxes, depreciation and amortization, based on expected 2013 profit of $70 million.

The purchase of Fortitech, which supplies ingredients for infant nutrition as well as dietary supplements, follows about 1.8 billion euros in takeovers by DSM to expand in nutrition, including the purchase of baby-food ingredient maker Martek Biosciences. Chief Executive Officer Feike Sijbesma is steering the company away from lower-margin, commodity-based businesses.

“The acquisition of Fortitech is the ninth acquisition in the Nutrition cluster since we announced our corporate strategy DSM in motion,” Sijbesma said in the statement.

Integrating Fortitech into existing operations will generate savings equal to about 10 percent of net sales by 2015. Another $70 million in one-time synergies are predicted as DSM avoids capital expenditure, DSM said.

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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