Ingredion Inc.’s deal to buy a fellow food-ingredient producer will expand the company’s range of products to meet growing demand for gluten-free and environmentally friendly ingredients, CEO Ilene Gordon said today.
Westchester-based Ingredion, which makes high-fructose corn syrup and was formerly known as Corn Products International, is buying Centennial, Colorado-based Penford Corp. in a deal valued at about $340 million. Penford makes potato starches used in paper and packaging at manufacturing facilities across six states and supplies cornstarch for use in foods.
Ms. Gordon noted Penford represented the “perfect size and type” of company Ingredion is seeking to acquire in order to build out product categories, and that Penford, which had $467 million in sales in fiscal 2013, was undervalued by the market.
“Bolt-on acquisitions like Penford are part of a successful strategy for us going forward,” Ms. Gordon told Crain’s. “At this point, we don’t need another transformational acquisition.”
Ingredion said it will pay $19 a share for Penford, which closed yesterday at $10.99 before rising 67 percent to end today at $18.59.
Ms. Gordon said Ingredion would continue to seek deals in the $300 million to $500 million range, particularly those that would allow the company to build its presence in foreign markets, with a focus on Asia.
She said the acquisition would produce annual cost savings of at least $20 million, or 10 cents to 15 cents in adjusted per-share earnings.
Ingredion is seeking to diversify its product lines to reduce its reliance on corn syrup, which has been under scrutiny by consumer groups.
The company’s shares fell 40 cents, or 0.6 percent, to close at $71.62 amid a broader market downturn.
By Peter Frost