Seeking Alpha: Novozymes And The High Cost Of Greatness

When I first started the process of refreshing and updating my research on Danish enzyme specialist Novozymes (OTCPK:NVZMY), I was really hoping that the end result would be an undervalued and appealing investment opportunity. This is a company that I like a lot and a stock that I want to like. Now, readers can carp about whether wanting to like a company pollutes the research/analysis process, but I see no reason to hide the fact that I think Novozymes is a well-run company with a strong leadership position in a sizable but growing industry.

Valuation is the issue. I realize that investors should expect to pay up for quality, and Novozymes's nearly 50% market share in the industry and strong history of ROIC generation are certainly marks of quality, but I'm not comfortable with the sort of growth/certainty that appears to be factored into the valuation today. Investors less sensitive to valuation may find more to like here (particularly after the 20% decline from the 52-week high), as this is the sort of situation where price is really my only major hang-up.

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Novozymes And The High Cost Of Greatness

Seeking Alpha: Lonza Targeting Significant Internal Improvements

Back in December I thought biopharma manufacturing and specialty chemical company Lonza (OTCPK:LZAGY) looked like a "middling" investment opportunity on the basis of a rich valuation and so-so organic growth prospects. Since then, the shares are up about 25% as investor interest in immuno-oncology has swelled, free cash flow generation has improved faster than expected, and management has laid out ambitious targets for profit growth and returns. I'm reluctant to call Lonza an uninspiring pick again, particularly as pharmaceutical manufacturers often get generous valuations, but the valuation does seem to factor in good progress on management's goals.

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Lonza Targeting Significant Internal Improvements

A Royal Present For Martek Shareholders

Martek Biosciences (Nasdaq:MATK) shareholders woke up to an early Christmas present Tuesday morning, as the company agreed to sell itself to a Dutch chemical conglomerate. Although Martek is going at price that is about 50% of its all-time highs, shareholders can take some satisfaction that their board of directors managed to get a price for these shares that the market has not been willing to pay for about two and a half years. 

A Healthy DealDSM (also known as Royal DSM) (Nasdaq:RDMSY), a Dutch conglomerate that is increasingly focused on nutrition and pharmaceuticals, has reached an agreement to acquire Martek for $31.50 per share in cash. That represents a total deal price of $1.09 billion for DSM and a premium of about 35% for Martek. That also represents roughly a 10 times multiple to trailing EBITDA - a price that is pretty fair for Martek given the multiples on comparables like Givaudan, Symrise, or Croda.

A Good Deal For DSM
This looks like a completely rational and savvy deal for DSM. The company has been working hard to reduce its industrial/performance chemical exposure (over $1.6 billion in divestitures recently), while increasing its nutrition and pharmaceuticals/life sciences exposure. To that end, not only does Martek's polyunsaturated fatty acids business fit in well with DSM's infant nutrition business, but the two companies had already been working together for some time. 


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