First Potash, Now Danisco as Food Inputs Head into Bull Market Overdrive

Montreal, Canada

DuPont Corporation (NYSE-DD) is setting the bar pretty high as the food mergers and acquisitions theme heads into bull market territory in early 2011.

Late last year, Australia’s BHP Billiton (NYSE-BHP) failed in its quest to acquire Canada’s Potash Corporation (NYSE-POT), one of the world’s largest fertilizer companies, after directors at the Saskatchewan-based giant squashed BHP’s offer. Meanwhile, Potash’s stock price is almost at the level BHP made its original offer – obviously not high enough.

DuPont will pay $5.8 billion dollars to acquire Copenhagen-based Danisco (CPH-DCO) to boost its specialty-food business. DuPont has become a giant force in the agricultural chemicals industry with sales of more than $31 billion dollars last year – dwarfing Monsanto (NYSE-MON). DuPont’s stock price fell on the news but has nevertheless posted an impressive 52% return since hitting a low almost 12 months ago.

Danisco, which fetched a 25% premium compared to last Friday’s close, makes DuPont’s bid an expensive deal amid soaring food costs in the emerging markets and skyrocketing grain prices since last summer. DuPont hopes to boost its second-generation bio-fuels using enzymes to transform non-food crop inputs into ethanol.

The trend is now “in play” as the “Feed the World” investment theme is running with the bulls over the last several months and leading the commodities space since November. That’s our focus in Commodity Trend Alert (CTA) in 2011 as more companies seek to boost mergers, acquisitions and exposure to crop inputs and alternative fuels.

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