FRANKFURT/OSLO Germany's BASF (BASFn.DE) has struck a deal to buy fish oils maker Pronova BioPharma PRON.OL for $845 million, hoping steady growth in health supplements will complement its more volatile chemicals and plastics businesses.
However, the Norwegian firm's shares climbed above the 12.5 crowns per share offer, as some investors expressed disappointment at the price and bet it might become the latest nutrition company to attract multiple bidders.
"The bid starts at the low end of what would be considered normal," said Carl Erik Sando of Odin Fund Management, which owns a 4.7 percent stake in Pronova. "One could imagine getting a higher price."
While many consumer goods companies are struggling in a faltering global economy, the nutrition sector has been a rare beacon of growth, even in weak European markets where ageing populations are trying to live more healthily.
This has prompted bids for several companies. On Tuesday, for example, Britain's Reckitt Benckiser (RB.L) closed in on a deal to buy U.S. vitamin maker Schiff Nutrition SHF.N after rival German bidder Bayer (BAYGn.DE) withdrew.
BASF said on Wednesday its bid for Pronova, which supplies the omega-3 heart medicine Lovaza to GlaxoSmithKline (GSK.L), was worth 4.845 billion Norwegian crowns ($845 million) including around 1.085 billion of debt.
A spokesman for GSK said the transaction would not affect its commercialization of Lovaza in the U.S. market.
BASF's agreed offer represents a 24 percent premium to the Norwegian group's average share price for the past six months, and is just 4 percent higher than Tuesday's close.
BASF said it had the support of Pronova management and binding commitments to back the deal from shareholders owning about 60 percent of the Norwegian firm's share capital, including the 50 percent held by Herkules Private Equity Fund.
"The premium is a bit low, but all in all we are satisfied. This is still the best solution for shareholders," Herkules Managing Partner Gert Munthe said.
"We have been in dialogue with other players and this is the best we could come up with," he added.
However, BASF also said the deal was subject to a 90 percent acceptance threshold among Pronova shareholders, signaling the deal could be derailed by a relatively small group of investors.
NOT VERY ATTRACTIVE
"The offer looks not very attractive to free shareholders, (but) the takeover may be successful, as BASF has already commitments of about 60 percent of the share capital," said Norbert Barth, an analyst at Baader Bank.
For BASF, the deal looked "very favorable," he added.
BASF's bid values Pronova at about 5.7 times its annual earnings before interest, tax, depreciation and amortization (EBITDA). That is less than the multiple of more than 9 that Dutch group DSM (DSMN.AS) paid this year for fish oil extract producer Ocean Nutrition Canada.
BASF has been buying into industries less exposed to economic fluctuations than its core chemicals and plastics operations, which cater to builders, carmakers and electronics companies. In May, it agreed to buy Equateq Ltd, a British maker of concentrated omega-3 fatty acids, for an undisclosed sum.
The group's existing nutrition and health business had 1.48 billion euros in revenue in the first nine months of 2012, accounting for 2.5 percent of group sales.
BASF said it planned to finance the deal from available funds. The detailed offer will be sent to Pronova's shareholders around December 5 and it expects the deal to close in the first quarter of 2013.
Pronova shares closed 4.6 percent higher at 12.55 crowns, after trading as high as 12.75 crowns.
($1 = 0.7811 euros = 5.7336 Norwegian crowns)
(Additional reporting by Terje Solsvik and Ben Hirschler; Editing by Mark Potter and Erica Billingham)