Martek Biosciences Corp. was started in the mid-1980s by a group of defense and aerospace scientists who wanted to study the effects of algae on humans in long-term spaceflight.
The Columbia-based company's improbable history has taken several turns since then, as the scientists eventually found market success with an algae-derived nutritional supplement for infant formulas. And on Tuesday, Martek was acquired for $1.1 billion by Dutch company Royal DSM, the world's largest producer of vitamins.
"Twenty years ago, Martek was a strange science lab experiment with algae," said Douglas M. Schmidt, chief executive of Chessiecap Securities, an investment bank focused on the Mid-Atlantic region. "There were more disbelievers than believers. There were immense challenges in production and government approvals and finding a market.
"It all looks great when you get a billion-dollar price," he added, "but it came after a lot of luck and hard work."
The deal comes as Martek has been casting about for other uses for its DHA supplement. Nutrition-conscious consumers have become interested in boosting their intake of the omega-3 fatty acid. DHA stands for docosahexaenoic acid, an oil derived from algae that's credited with benefits to the brain and central nervous system.
Under DSM, Martek's employees would be part of a global conglomerate — and have access to a worldwide marketing and distribution operation, as well as broader research and development capabilities — and its shareholders would get a 35 percent premium on the stock.
DSM officials said no significant job cuts are planned at Martek, which has 600 employees, one-third of whom are in Columbia. Both corporate boards approved the deal, which is expected to close in the first half of next year.
Martek beat the odds against life science companies, many of which spend years as money-losing research operations. It can take years to develop a marketable product and lure a larger, deep-pocketed buyer.
"This is a maturation point for Martek," said Renee Winsky, chief executive of the Tech Council of Maryland, the state's largest technology and biotechnology trade association. "They are now a global competitor, and that doesn't happen every day. They've made a lot of steps over the years to get them into this position."
The terms of the deal value Martek stock at $31.50, a 35 percent premium over Monday's closing price. Shares of Martek jumped more than 35 percent Tuesday, or $8.31, to close at $31.67.
Steve Dubin, Martek's chief executive, owns more than 130,000 shares, which could garner him more than $4.1 million in the sale. Dubin also has severance and change-of-control agreements worth as much as $2.5 million. Four other top executives have severance agreements ranging in value from $1 million to $2.4 million, according to Securities and Exchange Commission filings.
Martek, founded in 1985 by scientists from the former Martin Marietta Corp., has become the leading provider of infant nutritional supplements, and it has Food and Drug Administration approval to market its product as "life'sDHA." Martek produces the only form of DHA approved for use in infant formula by the FDA. The additive is found in about 99 percent of infant formula in the United States, according to the company.
In recent years, Martek has added its DHA oil to other products, such as dietary supplements and salad and sandwich dressings at the Quiznos restaurant chain. In all, the company says its DHA supplement is found in about 350 food, beverage and supplement products around the world. ( Fish oil also contains naturally occurring DHA, but the company says many consumers seek a vegetarian alternative.)
Stephan Tanda, a managing board director for DSM, said the Dutch company plans to expand Martek's DHA oil supplement in its own infant formula supply business around the world. Tanda said that DSM has for years supplied Martek with another type of infant formula supplement, known as ARA.
"We really see it as an ability to accelerate the growth of Martek," Tanda said of the acquisition. "They've built a fantastic business, but their presence outside the United States is rather limited. We have the potential to take them global."
DSM is in many different markets involving food and nutrition, including animal nutrition and vitamins, as well as pharmaceuticals. The company, which has 22,000 employees worldwide and revenue of more than $11 billion a year, also has a significant business in materials sciences.
Martek employees will be joining a company that is a "strong practitioner of industrial biotechnology," Tanda said. DSM produces biomedical materials that can be used inside human bodies, Tanda said. DSM is also the world's largest producer of coatings for fiber optic cables, he added.