Ingredion to add new ingredient to portfolio

Ingredion, which acquired Penford Corp. Wednesday, is a major corn refiner. Creative Commons /Randy Wick
Ingredion, which will buy Penford Corp., is a major corn refiner. Creative Commons /Randy Wick

By Nicholas Heinzmann

Ingredion Inc., moving to expand beyond its low-margin base in corn sweeteners, said Wednesday it will pay $340 million to acquire Penford Corp., a maker of specialty starch products.

Westchester, Illinois – based Ingredion is handing over a stiff premium for the acquisition: While Penford shares closed at $10.99 a share Tuesday,  the accord calls for Penford holders to receive eye-catching $19 for each of their shares.  After the agreement was unveiled Wednesday morning, Penford surged $7.74, or 70 percent, to $18.73 in late Nasdaq trading.

The pricey, all-cash deal underscores how Ingredion is seeking to respond to changing consumer tastes. Indeed the food and agriculture industries as a whole are trying to distance themselves from corn-based syrups and additives, which Americans are increasingly shunning  in favor of low-sugar and gluten-free options.

“This acquisition is another step in executing our strategic blueprint for growth,” said Ingredion chairman and CEO Ilene Gordon.  By expanding the company’s higher-value specialty portfolio, she said, the deal allows Ingredion to address “growing consumer trends, including nutrition, gluten-free, food textures, and sustainable green solutions.”

Ingredion, formerly known as Corn Products International Inc., manufactures starches and sweeteners for food and industrial purposes. The majority of its business involves refining corn into products such as high-fructose corn syrup, a liquid sweetener found in many foods and soft drinks.

The sweetener, however, has come under fire in recent years. A growing number of consumers have come to associate high-fructose corn syrup as synonymous with obesity and diabetes.

Penford, based in Centennial, Colorado, manufactures specialty starches, primarily from potatoes, that can reduce fat levels, improve fiber content and modify texture, color and consistency in products like canned foods and processed meats.  Acquiring a company that emphasizes its use of natural-based ingredients gives Ingredion access to a growing market niche.

The combination represents a “tremendous opportunity” for both companies, said Thomas Malkoski, president the CEO of Penford, because it brings together businesses with “complementary product portfolios and capabilities.”

Ingredion isn’t the only agribusiness concern to identify such opportunies. Earlier this week industry giant Archer Daniels Midland agreed to pay $170 million to acquire closely held Specialty Commodities Inc., a company based in Fargo, North Dakota, that focuses on natural and organic ingredients such as dried fruit and quinoa.

“One of the ways we are improving returns and reducing the volatility of our earnings is through the expansion of our specialty ingredients portfolio,” ADM chairman Patricia Woertz said at the time. “Consumers around the world are demanding higher-quality, better-tasting, healthier foods with clean labels.”