DSM to acquire US dairy flavors company First Choice Ingredients in US$435M deal

03 Sep 2021 --- Royal DSM is poised to acquire First Choice Ingredients, a key supplier of dairy-based savory flavorings, for US$453 million. Subject to regulatory approval, the transaction is expected to close in Q4 2021. 

Hailed as a strategic fit, DSM says the acquisition is “highly attractive” and aligns with its strategy and growth plans, predominantly focused on nutrition.

Hailed as a strategic fit, DSM says the acquisition is “highly attractive” and aligns with its strategy and growth plans, predominantly focused on nutrition.

“Combining our capabilities, our customers in F&B can look forward to a variety of solutions delivering delivering taste, texture and nutrition solutions in applications such as soups, snacks, salad dressings and sauces, prepared meals, sweet baking, as well as dairy products and plant-based meat and dairy alternatives,” Patrick Niels, president of DSM Food Specialties tells FoodIngredientsFirst. 

First Choice Ingredients has built a leading position in the US taste market as a developer of clean label, fermented dairy-based savory flavorings.“DSM can further accelerate the growth of First Choice Ingredients by offering their products outside the US to DSM’s broad global customer base and integrating their solutions in DSM’s full offering for F&B customers. The acquisition gives First Choice Ingredients access to DSM’s world-leading biotechnology toolbox, fermentation know-how, and global customer relationships,” he continues. 

First Choice Ingredients has built a leading position in the US taste market as a developer of clean label, fermented dairy and dairy-based savory flavorings for taste and functional solutions across a wide range of applications.

The company is headquartered in Wisconsin, US, and has three manufacturing facilities close by. It ferments and blends various natural dairy products with cultures and enzymes to create clean label taste solutions that integrate sensory and functional benefits.

It collaborates with food producers, flavor houses and foodservice suppliers.

Highly synergistic
Through this deal, it will be able to tap into one of the industry’s most extensive enzymes and cultures strain portfolio, scale up and unlock new value in new market segments by including its offerings in the DSM’s integrated solutions.

DSM also offers the company access to its biotechnology toolbox and fermentation know-how.

“We look forward to welcoming the First Choices skilled people to DSM. They have a shared passion for science-based solutions for delicious, nutritious, and sustainable food and beverage products. Its acquisition will enable us to extend our integrated solutions offering in food and beverage, and provide our customers with innovative taste solutions for the new and improved end-products today’s discerning consumers continually demand,” Niels adds. 

This transaction represents an EV/EBITDA multiple of 19.8x based on the estimated 2021 Adjusted EBITDA. The estimated 2021 sales amount to about US$75 million.

DSM is a powerhouse of global solutions to the food and beverage industry with capabilities in nutritional ingredients like nutritionalIn addition to plant-based meats, customers can benefit from a host of solutions including soups, snacks, salad dressings and sauces, prepared meals, sweet baking. lipids, vitamins and nutrient premixes. It operates a global product portfolio of specialty ingredients such as cultures, enzymes, yeast extracts, process flavors and texturizing hydrocolloids.

Patrick Niels, President of DSM Food Specialties, adds how the deal will allow DSM to extend its integrated solutions offering in food and beverage by providing customers with innovative taste solutions “for the new and improved end-products today’s discerning consumers continually demand.”

Fermentation and biotechnology know-how
DSM stresses that its expertise in application and formulation, nutritional science, including fermentation, offers manufacturers and brands to improve taste and texture and optimize nutritional profiles and health appeal while boosting process efficiencies and reducing loss and waste.

“This will enable us to accelerate our growth by adding our taste solutions to DSM’s broad portfolio of global products and integrated offerings to meet the needs of our customers and create new opportunities. This combination will allow access to DSM’s powerful toolbox of fermentation technology,” notes Roger Mullins, executive VP of First Choice Ingredients.

By Gaynor Selby