KD Pharma, Marine Ingredients merge to form world's third-biggest omega-3s supplier

02-Oct-2016 - Last updated on 03-Oct-2016 at 16:21 GMT

Marine Ingredients bought this mid-cocentrate extraction facility in Norway from BASF prior to the merger. Marine Ingredients photo.

A powerful new omega-3s player will enter the market with the announcement of a merger between KD Pharma and Marine Ingredients. The combination will form the third-biggest company in the omega-3s space, according to an executive.

The companies were enthusiastic about the market coverage the combined entity will enjoy with the two divisions’ complementary capabilities. KD-Pharma, based in Bexbach, Germany, is a leading supplier of ultra high omega-3 concentrates used in pharmaceutical applications and has been participating more in nutraceutical applications as well. Marine Ingredients, based in Mount Bethel, PA, is a leading supplier in medium-level omega-3s concentrates and does custom manufacturing for brand owners as well.

Included in the merger are Marine Ingredients’ Norway-based manufacturing operation, specializing in natural and low-to-medium concentrated fish oils, transesterification, and liquid bottling, as well as Marine’s interest in Bering Select – a new Cod Liver Oil production facility located in Dutch Harbor, Alaska. Marine’s Florida-based InnovaGel, a contract manufacturer of soft gels, is also included, bringing substantial value-added capabilities to the new organization.

Both companies are private, so terms of the deal were not disclosed. The parties expect a rapid close, with anticipated completion before the end of 2016, though Evan DeMarco, KD Pharma’s director of market development said that full integration will take somewhat longer.

One question that often arises among observers of deals like these are who is absorbing whom. In other words, who will be the dominant player who might weigh in more heavily on the future combined culture of the company? One can take a hint from the organization of the new executive suite: Oscar Groet, CEO of KD Pharma will serve as CEO for the combined organization, while Marine Ingredients’ management, led by its President, Olav Sandnes, will continue to run Marine Ingredients and will coordinate the group’s global nutritional supplement business. The companies did stress that they intend to form a single group.

That operational flexibility will make a formidable player in the market, DeMarco told NutraIngredients-USA.

“With KD Pharma’s position in high concentrates, to Marine Ingredients’ strength in low to mid-grade concentrates and its turnkey manufacturing capabilities, we can expand our collective reach to offer something in every phase of the market. We think we will really be a power,” he said.

Higher concentrates have health message to tell

DeMarco said the combined company will be No. 3 in the omega-3s manufacturing world behind diversified materials giants DSM and BASF. He said the company will also be well positioned to benefit from the director of the market toward higher concentrates. The lowest rung of the ladder, represented by the base specification 18:12 oils, has been heavily commoditized. And DeMarco said that while the higher concentration oils offer a better chance for making a decent margin, they have a health story to tell as well.

“With all of the fat that’s already in the typical North American diet, there is a recognition that crude 18:12 oil is necessarily the most healthful choice. There really has been a switch to higher concentrates, and now we have the capability of offering those higher concentrates on the triglyceride side,” DeMarco said. (The high pharma concentrates are typically in ethyl ester form, he said.)

“The typical Western diet is so rich in pro-inflammatory omega-6s, with your McDonalds and your Taco Bells. The thought is that putting a couple of giant 18:12 capsules on top of that, you might in a way be offsetting the benefits of the omega-3s,” he said.

DeMarco said he saw the merger as emblematic of the direction the market is moving toward maturation and consolidation. Significant growth opportunities still exist, but in the future there may be fewer companies chasing those opportunities.

“There is more and more consolidation in the market. There are so many smaller players out there on the low concentration side who are dipping their toes into what is really a commodity market. With this merger we now have all five fish oil extraction methods in house,” DeMarco said.