UPDATE: Corn Products To Acquire National Starch For $1.3 Billion

Corn Products International Inc. (CPO) announced plans Monday to pay $1.3 billion in cash for National Starch, expanding its reach in Asia and in higher-margin processed foods.

The proposed deal would boost the U.S. company's sales by a third and is expected to be accretive by the end of 2011, but its shares slid 10% in the wake of the announcement.

The purchase price for National Starch, which is owned by Dutch specialty chemical maker Akzo Nobel NV (AKZOY, AKZA.AE), was above analysts' expectations, and the additional debt it is taking on could also make Corn Products less attractive to long-time suitor Bunge Co. (BG).

Corn Products' shares were recently down 10.3% at $31.27.

Corn Products is looking to expand its offerings to food companies beyond its existing range of sweeteners and starches, and expects gross cost synergies of at least $50 million, with the full run-rate coming in 2012.

National Starch had 2009 revenue of $1.2 billion compared with the $3.9 billion generated by Corn Products.

The proposed deal is expected to close in the third quarter and is the largest to date by Corn Products' Chairman and Chief Executive Ilene Gordon.

"They're really the go-to company with food companies in terms of designing new products," Gordon said during a conference call, citing National Starch's role in ingredients for soups, sauces, yogurt and mayonnaise.

National Starch is also strong in the corrugated and paper market, she said.

The acquisition is expected to be funded mainly with debt, though Corn Products plans to maintain its investment-grade rating.

The acquisition will create an an expanded footprint for Corn Products in Asia, including China, as well as Europe and Australia, she said.

Cheryl Beebe, chief financial officer, said Corn Products would look for opportunities "to consolidate manufacturing platforms," but officials wouldn't specify any potential staff cuts. National Starch has 2,200 employees while Corn Products has about 8,000.

Gordon acknowledged that, with the purchase, her company "did a couple years' worth [of mergers and acquisitions] all at once," saying National Starch was a particularly good fit that will help Corn Products increase shareholder value.

The deal should pose no antitrust issues, Gordon said, as the companies aren't competitors in most areas.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com

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