Bioscience firms Novozymes and Chr. Hansen to merge in biggestever Danish deal

Biotechnology companies Novozymes and Chr. Hansen agreed to combine in what will be the biggest ever merger between two Danish companies.

The merger, announced in a joint statement Monday, will see the dissolution of Chr. Hansen and is expected to complete in the fourth quarter of 2023.

The new group will have annual revenues of approximately 3.5 billion euros ($3.7 billion), the companies said.

Chr. Hansen develops ingredients for the food, pharmaceutical and agricultural industries, while Novozymes describes itself as the world’s largest provider of enzyme and microbial technologies.

Novozymes CEO Ester Baiget and CFO Lars Green will continue in their positions in the combined group.

“Novozymes and Chr. Hansen share the strong conviction that our combined scale, know-how, commercial strengths, and innovation excellence will drive value for our shareholders, customers, and society at large by providing the sustainable solutions the world so urgently needs,” Baiget said.

Novo Holdings, the largest shareholder in both Novozymes and Chr. Hansen, said the two companies were a “perfect match.” It has said it will vote in favor of the merger at upcoming extraordinary general meetings of both Novozymes and Chr. Hansen, set to take place during the first half of 2023.

After completion of the merger, Novozymes free float shareholders will own in aggregate 44% of the total share capital of the combined group, Chr. Hansen free float shareholders will own 34% and Novo Holdings will own 22%.

The companies said they expect the new group to post organic revenue growth of 6-8% until 2025.

“Beyond 2025, ambition is to continue to deliver accelerated sustainable growth from the underlying business coupled with new, and de-risked, innovation and growth opportunities,” they added.

Novozymes will pay a 49% premium to Chr. Hansen, a figure that raised eyebrows among some analysts and led Novozymes shares sharply lower on Monday.

“This is a large premium, and appears to be based on high synergy assumptions, 16% of CHR revenues for revenue synergies and 7% of revenues for cost synergy target,” Jefferies analysts remarked in a note.

That overall premium shrinks to 38% for Novozymes shareholders, with Novo Holdings transferring its stake at a 1% discount. Baiget told CNBC on Monday that this comes down to 31% if looking at a 60-day average, and voiced confidence that the “cross-fertilization” of both companies’ strategic strengths in their respective markets would justify the premium.

“We have ... the support of a longterm shareholder, the main long-term shareholder of both companies, and with that support in place we see also the belief and the reassurance of the potential of value generation for these two companies together, short and long term,” she said.