Will Novonesis Be the Merger That Bucks the Trend?

Novozymes today completed its acquisition of fellow industrial biotech group Chr Hansen. It took just over a year and only one antitrust disposal to create the undisputed leader in enzymes and bacteria for industrial processes historically relying on chemistry.

“It’s been a journey,” as CEO Ester Baiget puts it. And one without any real major drama.

So far so good.

It’s only when you look around Novonesis’ world, one inhabited by agrochemical customers and ingredients companies, that the doubts can creep in. It’s hard to find a mega-merger or transformation deal in the space that fully lived up to its billing. The poster child is Bayer’s disastrous $63 billion acquisition of Monsanto (which actually ended an alliance between Novozymes and Bayer). But many people in the industry struggle to see the value created by the other large agrochemical deals of the day, like China’s $43 billion acquisition of Syngenta and BASF’s purchase of Bayer’s seed assets. In ingredients, you have International Flavors & Fragrances’ $26 billion merger with DuPont’s Nutrition & Biosciences business, a deal that’s hammered the share price.

What sets Novonesis apart from other big deals, in Baiget’s eyes, is partly the lack of overlap between the two companies, whether that’s in enzymes used in dairy or bacteria in probiotics for human and animal health. It’s less about creating a one-stop shop to dominate a customer’s supply chain, more about creating a pick n’ mix sweet shop of value-added solutions. Another factor in Novonesis’ favour is both merged companies involved are Danish, making Baiget’s job of creating a single yet diversified culture an easier task: the announced leadership team is already 41% female.

“We are starting from a good space,” Baiget said in an interview. The focus on Day 1 is harnessing the synergy potential, R&D and cost-savings potential in areas like purchasing, she added. Novonesis now has both the cultures to ferment the protein and the enzymes to extract the protein from the plant with the right texture.

“We are combining the fermentation, microbes, the probiotics, the proteins and enzymes altogether in one,” Baiget said.

Novonesis’ solutions target some of the world’s most pressing problems, like making pesticides, plastics and fuels more sustainable. But while biotechnology has made inroads in agriculture, especially in fruit and vegetables, there’s no blockbuster yet. Despite weed tolerance of pesticides, most farmers still look to GMO developments for the next solution.

“Yes it could take time to make a big breakthrough, we are working on some,” Baiget said, citing Novozymes joining a consortium with the Bill & Melinda Gates Foundation to convert CO2 into protein for human food. “Will it happen tomorrow or the day after, no.

“Size matters. It gives you the resilience to embrace the endless opportunities. Biology is agnostic of the market and end use, enzymes and microbes can be used in different alternatives. That doesn’t happen with chemistry. When you are in polypropylene, you make rigid packaging.”

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