Street View: Analysts question Novozymes, Chr Hansen merger synergies

Chr Hansen Holding A/S

13/12/2022 13:05

** Danish bioscience companies Novozymes  NZYMb.CO  and Chr
Hansen  CHRH.CO  said on Monday they have agreed a statutory
merger with aim to creating a global biosolutions group with
annual sales of around EUR 3.5 bln ($3.68 billion) and revenue
synergies of EUR 200 million
    ** While analysts seem to agree the deal is positive for Chr
Hansen shareholders, transaction benefits for Novozymes, which
will be the continuing company, are less clear
    SYNERGY TARGET - REALISTIC OR NOT?
    ** Barclays cuts rating on Novozymes to "equal weight,"
saying it is concerned about the strategic and financial logic
of the merger "which dilutes a strong organic growth story"
    ** In its view Novozymes' management will "struggle to
convince shareholders of the merits of the deal" as the 38%
premium to holders of Chr. Hansen stock is about twice as much
as the net present value of the synergies
    ** J.P.Morgan keeps Novozymes at "overweight" -- although
the value of the deal is unclear for the company's shareholders,
the market is already pricing in a material value destruction,
it says
    ** At the same time the brokerage finds the targeted EUR 200
mln revenue and EUR 80-90 mln cost synergies "somewhat high"
    ** Despite portfolios being complementary in terms of 
technology, end-market overlaps are relatively small, Jefferies
flags, making the broker "sceptical" of the revenue synergies
    ** Nordnet analyst Per Hansen agrees there is no prospect of
very large synergies in the short term, but says the merger will
probably make good sense in three-four years' time
    ** In the short term, Novozymes has paid a hefty
over-premium relative to Chr. Hansen share price and investors
showed their scepticism on Monday by sending Novozymes shares
down, he adds
    ** While Monday's market reaction was strong, it was also
very natural, Sydbank analyst Per Fogh outpoints 
    ** He explains that to finance the purchase Novozymes must
issue new shares corresponding to 80% of its current share
capital, creating a natural pressure on the shares when so many
of them are being traded
    ($1 = 0.9509 euros)
 (Reporting by Louise Breusch Rasmussen)
 ((Louisebreusch.rasmussen@thomsonreuters.com))