FMC steps up competitiveness with alginates acquisition

Under the agreement announced today, FMC will acquire ISP's alginates and food blends business, apart from its Brazil-based Germinal blending business.

It will be integrated into FMC's biopolymer division.

"The integrated business will enable FMC to offer customers a broader range of alginates and functional system blends and improve our geographic coverage in key markets," said Ted Butz, vice president and general manager of FMC specialty chemical group.

"This move will further strengthen our global cost competitiveness by increasing our capabilities to source raw materials, drive production efficiencies and deliver improved supply chain economics."

Alginates are hydrocolloids derived from alginic acid obtained from seaweed (kelp) and are very versatile biopolymers used in a wide range of food, pharmaceutical and specialty applications.

Hydrocolloids have been subject to rising raw material and energy costs, which have affected manufacturers across the board.

FMC said it hopes the acquisition will establish it firmly as a leader in the hydrocolloids market, and it part of a wider global supply growth strategy.

In January, it expanded its microcrystalline cellulose (MCC) production to meet growing demands from the food industry, particularly for low fat products.

The financial terms of the agreement were not disclosed, but ISP's hydrocolloid ingredients business had revenues of about $80m in 2007.

The companies expect to close the transaction following satisfaction of customary closing conditions.

Dennis Seisun, from hydrocolloid consulting company IMR International, said the acquisition is subject to regulatory approval.

ISP is currently the leader in alginate production, and FMC is second, so it is a substantial move.

He said: "This is yet another indication of consolidation in our business, as companies continue to gobble up each other."

ISP 's alginate business ISP has recently put efforts into extending its hydrocolloids business.

In only January this year, it formed a partnership with the Center for Advanced Technology and Innovation (CATI) to expand the use of ISP's alginate in restructured foods.

Eric Beatty, marketing director for FMC biopolymer division, told FoodNavigator-USA.com he was unable to speculate on why ISP wants to sell after such efforts.

However, he said FMC is excited about evaluating this relationship and continuing it.

Last October, ISP announced price increases for all of its propylene glycol alginates, of between 10 and 15 percent, after feeling the pinch of higher raw materials and energy costs.

Beatty said: "Our alginate pricing will not change as a result of this transaction, but we will continue to evaluate all our pricing as changes occur in the economy."

Hydrocolloids demand According to Beatty, demand for alginate has increased slightly in the food and pharmaceutical industries.

Useful applications include fruit filling and fruit spreads, as the product can be used to restructure the leftovers of fruit and vegetable products after their processing.

The increasing demand for healthy, low-fat products has provided new innovation opportunities for manufacturers of some hydrocolloids, which can be used as replacers.

Food manufacturers across the board have been investing in solutions for healthy products that still taste good to meet the demands of the health conscious consumer.