Cargill invests US$25m in BioGaia, microbiome collaborations to follow

13 Nov 2020 --- Cargill is set to partner with BioGaia for digestive and immune health following a US$25 million investment. The anchor investment gives Cargill an initial minority stake in the Sweden-based company and was part of BioGaia’s directed issue of 2.86 million class B shares, raising proceeds of SEK 1.1 billion (US$127 million).

“While Cargill is a minority owner, we have already begun working on a number of collaborations. Over the coming 24 months, we also expect to broaden these collaborations to include possible investments together,” a Cargill spokesperson tells NutritionInsight.

“This directed share issue was an opportune chance to deepen and formalize our partnership, and we will reevaluate our position in due course,” they continue. 

This company alignment will help position Cargill Health Technologies (CHT) – established just a year ago – as a leader in digestive and immune health through modulation of the microbiome with a variety of technologies.The investment will help CHT accelerate the growth and expansion of current health solutions available to consumers.

Accelerating growth and expanding microbiome solutions
According to CHT’s president, Chuck Warta, the investment will help CHT accelerate growth and expand its range of health solutions for consumers. 

“We can build upon our combined leadership to tackle a number of health conditions addressable through the microbiome. We’re excited about how this investment will help to build [CHT], and we look forward to continued growth in this space,” he continues. 

“We are excited by the beginning of this strategic partnership and have initiated a number of collaborations with them that will materialize during the coming years,” adds Peter Rothschild, chairman of BioGaia’s board. 

More CHT investments to follow
CHT has already invested in two other companies in human and animal nutrition and health. 

It has a minority investment in Delacon, an Austrian phytogenics company. In 2018, Cargill also acquired Diamond V, which offers EpiCor, a postbiotic fermentate.

“There are possibilities for exciting synergies between EpiCor and BioGaia for human ingredients and with Delacon and Diamond V for animal application,” says the spokesperson.

“Looking ahead, we are committed to further investment in the health space for humans and animals. We will continue to pursue our goal of investing in a number of companies with pre, pro and postbiotic capabilities to build our portfolio of synbiotic solutions that help people live more healthy days,” they continue.

Due to the breadth and complexity of the health arena, CHT has been refining its focus on the health outcomes and customer segments it wants to pursue.

“With a focus on digestive and immune health, it is important to note that research and science on gut health and the microbiome is a rapidly developing field,” adds the spokesperson. BioGaia intends to act swiftly on potential future acquisitions, including minority investments.

Other investors leap at BioGaia
Ultimately, BioGaia’s directed issue was oversubscribed, with a wide range of Swedish and institutional investors participating. In addition to Cargill’s investment, EQT Public Value Fund FCP-RAIF and certain existing shareholders also took part.

In light of this interest, some larger shareholders, including Annwall & Rothschild Investments AB and David Dangoor, sold 229,332 class B shares in total at the same price as in the directed issue.

“We are really pleased by the significant interest by the new investors and also the support shown by our existing shareholders,” says Rothschild.

BioGaia intends to use the proceeds from the direct issue to accelerate growth. This is by acting swiftly on potential future acquisitions, including minority investments. 

According to the company, the ongoing consolidation of the industry presents interesting acquisition candidates in all parts of the value chain on a global level. Potential acquisition candidates include investments in complementing products within BioGaia’s focus areas of manufacturing capabilities and research.

In October, BioGaia reported reduced sales due to pandemic. “The decrease in sales is of course very unfortunate, but we believe that it is related to COVID-19 and that this will not affect our long-term expectations,” Isabelle Ducellier, CEO of BioGaia, said at the time.

“To reduce the effect on earnings, we are reviewing our costs to partially compensate for the decrease in sales.”

However, the company reported a good start to 2020 in early May. In March, it voiced ambition for growth in international probiotics. 

By Katherine Durrell