By Thomas Lee
Landec Corp. (NSDQ:LNDC) will pay $40 million to buy Lifecore Biomedical Inc. of Chaska, Minn., one of the state’s most experienced and fastest-growing biotech firms.
Founded in 1965, Lifecore makes hyaluronic acid-based biopolymers used in ophthalmic and cosmetic skin procedures and in treating osteoarthritis. Hyaluronic acid is a fluid found naturally in the skin, cartilage and inside the eye. Manufactured hyaluronan compounds possess lubricative, connective and shock-absorbing qualities found in soft and bone tissues.
Lifecore expects to generate between $26 million to $28 million in sales this year, a 3 percent to 4 percent gain from 2009. The company estimates its earnings before interest, taxes, depreciation and amortization to hit $7 million to $8 million, giving it a profit margin of 27 percent.
The deal is good for private equity firm Warburg Pincus — it paid $239 million to acquire publicly traded Lifecore in 2008 and folded its larger dental business into one of the firm’s portfolio companies — and for Menlo Park, Calif.-based Landec Corp., a materials science firm specializing in food and agriculture. With Lifecore, Landec can finally break into medical technology, said CEO Gary Steele.
“We have shied away from medical applications,” Steele told analysts during a conference call. “Now we have venue for looking at high-value opportunities.”
In a brief phone interview, Lifecore CEO Dennis Allingham said the company, which will operate as a wholly owned subsidiary of Landec, will retain its senior management team. There will be no layoffs, Allingham said, noting Lifecore is one of the few Minnesota companies to add jobs during a tough economy. Lifecore today employs 125 people, about 25 percent higher than 2009.
Nothing will really change, he said.
“We really don’t care who owns us,” Allingham said. “We will continue to grow.”