Royal DSM announced Jan. 29 that it intends to create a 75/25 joint venture with Nenter & Co. Inc. that will include all Nenter’s production and related assets for vitamin E.
In order to fulfill its future need for vitamin E, DSM said it will acquire a 75% shareholding in the joint venture, for a cash consideration of about 135 million euros, representing an enterprise value/earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of roughly 6x based on the estimated 2019 EBITDA generated by Nenter’s vitamin E business.
DSM said the joint venture will acquire and operate vitamin E production facilities in Jingzhou in Hubei, China, and will have a minority shareholding in Nenter’s Shishou facility, also in Hubei. The joint venture will exclusively produce vitamin E for DSM subject to existing supply agreements of Nenter, and there will be a profit share agreement in place between DSM and Nenter.
DSM will, together with Nenter, upgrade and refurbish the facilities and improve operational performance to secure high-quality and sustainable supply of vitamin E while ensuring compliance with DSM’s safety, health and sustainability standards, the announcement said.
DSM said the joint venture will enhance its vitamin E position and provide it with cost-effective access to additional capacity that will allow DSM to continue to grow organically in vitamin E, which is an essential ingredient in its animal nutrition premix solutions.
The joint venture will also strengthen DSM’s global supply chain footprint, enabling the company to offer locally produced vitamin E in China and the Asia Pacific, along with its facilities in Switzerland, the company said. This will support DSM’s strategic actions to reduce its working capital requirements by simplifying its supply chain.
Vitamin E is well recognized and accepted as nature’s most effective fat-soluble, chain-breaking antioxidant, protecting cellular membranes from being attacked by lipid peroxyl radicals, DSM said. Although primarily known as an efficacious biological antioxidant, vitamin E has more benefits, including maintenance of the structural integrity of all tissues and substantial contribution to optimum health and disease resistance of farm animals due to its modulating effects on the immune system.
The transaction is subject to several regulatory approvals and expected to close in either the second or third quarter of 2019.