New turmoil in the $3 billion industrial enzyme industry: Basf agreed to buy Verenium

Kurt Bock, Ceo of Basf
Kurt Bock, Ceo of Basf

Basf, the world’s biggest chemical maker based in Ludwigshafen (Germany), agreed to buy Verenium Corp., a leading industrial biotechnology company focused on the development and commercialization of high-performance enzymes, to pursue growth in biotechnology and close the gap on market leaders DuPont and Novozymes in the $3 billion industrial enzyme industry.

Under the terms of the merger agreement, holders of outstanding shares of Verenium’s common stock will receive $4 per share, representing a 56% premium to the volume weighted average closing price of Verenium’s common stock in the six months prior to announcement of the transaction.  Each of the directors and officers of Verenium has entered into tender and support agreements pursuant to which they have agreed to tender all of their shares.

The acquisition is an all-cash tender offer for all outstanding shares of Verenium common stock to be followed by a back-end merger.  The tender offer is subject to standard closing conditions, including the acquisition of a majority of the shares outstanding including shares underlying options and warrants for which notices of exercise are received prior to the expiration of the tender offer for which shares have not yet been issued. The tender offer is expected to close in the fourth quarter of 2013.

“We believe this deal should enhance the growth profile of Basf’s enzymes franchise, and herald a significant longer-term shift in the competitive landscape in industrial enzymes and agricultural enzymes for Novozymes and DuPont’’,  Laurence Alexander, an analyst at Jefferies, said in a note.

While small in size, Basf’s acquisition is a sign that Chief Executive Officer Kurt Bock is committed to breaking the strangehold of the two leading rivals. Chemical companies use enzyme technology to produce ingredients and enhance the performance of products such as animal feeds and detergents.

Enzymes are specialized proteins that speed up (catalyze) chemical reactions and are essential in all living systems. Without enzymes, biological processes would occur much too slowly to sustain life. Enzymes are so powerful that one single enzyme can process up to a million molecules every second. Microbes found in diverse ecosystems are one of the world’s largest sources of unique enzymes.

Basf, by buying Verenium is gaining market share, and more importantly access to a large and diverse enzyme library. The US company based in San Diego (California), which has global partnerships with blue chip companies such as Cargill and Danisco,  markets 10 industrial enzymes derived from bacteria and fungi that serve attractive, high-growth segments of the $3 billion global industrial enzyme market. Verenium has developed several additional enzyme products that are in the regulatory process or final stage of development prior to commercialization.

Combining Verenium’s scientific and technological excellence with Basf’s enzyme activities and its global access into all relevant markets will strengthen Basf’s footprint in the strategic enzyme growth market.

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