Merging to create a global leader in biosolutions Novozymes and Chr Hansen announced the intention to merge in December, to create a biosolutions leader with pro forma revenues of EUR3.5bn and EBIT of EUR900m. Management believes the combination will ''unleash the full potential of biological solutions'' with more diversified exposures which will help to ''de-risk'' the longer term organic growth outlook and innovation pipeline and will be even better equipped to address sustainability challenges. A complex deal at a premium price, with limited accretion (4% to ROCE) There is no debate that both Novozymes and Chr Hansen are individually strong players in the biosolutions space. However we are sceptical that this deal will create more value than could be achieved standalone bearing in mind the complexity of the transaction and the lack of past experience in large scale MandA. The pro forma mid term targets of 6-8% organic growth and 29% EBIT margins do not offer upside to the sum of existing standalone targets. Value of synergies fully transferred to Chr Hansen shareholders The initial deal terms implied that Chr Hansen shareholders receive a blended 38% premium to the undisturbed share price or an absolute value of ~EUR3bn. We estimate the NPV of synergies to be worth ~EUR2bn which suggests that more than 100% of the synergy value is transferred to Hansen holders. Both stocks have since derated (perf now linked by the exchange ratio) reflecting profit taking from Hansen holders and disappointment on the deal terms from Novozymes holders. We reiterate our Underperform rating on Novozymes, Chr Hansen back to Underperform Prior to the deal we were negative on the standalone investment cases for both Novozymes and Chr Hansen on LT organic growth risks and their premium valuation to peers. We are not convinced that this deal will fully address those growth concerns and PF valuation of 18x 2023 EV/EBITDA remains one of the highest in the sector....