DuPont-IFF merger will create €40 billion nutrition and flavour business

By Nathan Gray contact

- Last updated on GMT

DuPont-IFF merger will create €40 billion nutrition and flavour business

Related tags: Mergers and acquisitions, Dupont, Iff, Probiotics, Flavours, Nutrition

A mega-merger between International Flavors & Fragrances Inc (IFF) and DuPont nutrition & biosciences unit will create a new industry giant worth more than $45 billion (€40.4 billion), say those involved in the deal.

The combination of IFF and DuPont’s nutrition and bioscience division (N&B) will create a global leader in high-value ingredients and solutions in the global food and beverage, home and personal care and health and wellness markets.

With a combined estimated 2019 revenue of more than $11 billion and EBITDA of $2.6 billion, the ‘complementary’ portfolios of the two businesses will give the new company leadership positions across multiple key markets including nutrition, probiotics, enzymes, taste, texture, scent, cultures, and soy proteins.

“The combination of IFF and N&B is a pivotal moment in our journey to lead our industry as an invaluable innovation and creative partner for our customers. Together, we will create a leading ingredients and solutions provider with a broader set of capabilities to meet our customers’ evolving needs,”​ said IFF Chairman and CEO Andreas Fibig, who will also serve as Chairman and CEO of the new company.

“With highly complementary portfolios, we will have global scale and leading positions in key growth categories to capitalize on positive market trends, drive strong profitable growth for our shareholders and create opportunities for our employees.”

The deal will see the companies combine, with existing DuPont shareholders gaining a 55.4% stake of the new company and existing IFF shareholders gaining a 44.6% stake, according to a statement by IFF. Upon completion of the transaction, DuPont will receive a one-time $7.3 billion special cash payment, subject to certain adjustments, noted a press release.

Strong competition

Earlier this year​, news emerged that DuPont was considering the sale of its nutrition and biosciences unit, with Kerry Group, DSM, and IFF all suggested to show strong interest at the time.

Just last week it emerged that the race was heating up​, as both IFF and Kerry Group emerged as strong contenders for the DuPont business unit. Those close to the situation suggested Kerry has long wanted to expand its footprint in the probiotics and nutritional products category.

In the end, however, IFF triumphed over Kerry as the New York-based business looks to continue its expansion in the fast-growing food ingredients business, and continue its rapid expansion following on from its $7.1bn deal for Israel’s Frutarom Industries last year​.

“DuPont and IFF share long and successful histories of customer-driven innovation and cultures of excellence, which is why I am confident that N&B will be well-positioned for its next phase of growth,”​ commented Ed Breen, Executive Chairman of DuPont, who will become lead independent director of the new business.

“I am pleased to join the Board of the combined organization and remain involved in unlocking the potential of this new company,”​ he said. “We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for N&B.”

Strategic sense

According to Mark Astrachan, analyst at Stifel, the merger makes ‘strategic sense’ to IFF, by allowing it to offer “a more complete product suite to a broader customer base.”

Meanwhile, IFF says the new company will be ideally equipped to deliver in-demand differentiated solutions for more natural, healthy products “to an expanded customer base spanning both large multinationals and fast-growing small and medium-sized customers.”

The company will also be an ‘immediate leader’ in the industry evolution toward healthier ‘better for you’ products.

The merger will be executed using a tax-efficient structure called a Reverse Morris Trust, IFF added.

Such transactions allow a company to avoid a big tax bill by spinning off a unit that it wants to divest and simultaneously merging it with another company.

After the deal closes, IFF expects cost savings of about $300 million by the end of third year.

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