IFF-DuPont mega merger: “Most balanced” partnership brings about new opportunities in numerous sectors
17 Dec 2019 --- The newly announced mega merger between International Flavor & Fragrances (IFF) and DuPont’s Nutrition & Biosciences (N&B) business is facilitating the creation of a new supply side behemoth active in the food, beverage and nutrition segments. The combined businesses are described as highly complementary, considering the companies’ shared end markets. In yesterday’s conference call, the merger’s consolidated product portfolios are described by the companies as “among the most balanced in the industry.”
“IFF and DuPont Nutrition & Biosciences will be stronger together. They will create a category-defining, integrated value-added solutions partner, with an enhanced ability to deliver differentiated, integrated solutions to thousands of customers across a broad range of end markets,” Dan Turner, Reputation and Media Relations Leader at DuPont, tells FoodIngredientsFirst.
“Each of our businesses have industry-leading technology, innovation and application capabilities. In the combined company, we can bring our science and creativity together to create new solutions that deliver differentiated innovation and faster growth for customers,” he adds.
The new merger expects to drive approximately US$400 million of gross annual revenue synergies. “We expect to achieve these synergies by targeting overlapping end markets to cross-sell Flavor & Fragrances into N&B customers and vice versa. Examples of this range from meat replacement, to ice cream to infant nutrition. We also plan to cross sell complementary solutions and leverage N&B’s extensive product portfolio to increase penetration with IFF’s large SME [small to medium enterprises] customer base,” says Richard A. O’Leary, Executive VP and CFO of IFF.
The transaction value of the merger values the N&B business at approximately US$26.2 billion and the combined company at US$45.4 billion on an enterprise value basis, based on IFF’s share price as of December 13, 2019. Under the terms of the agreement, DuPont will receive a one-time US$7.3 billion special cash payment, subject to certain adjustments. DuPont shareholders will also own 55.4 percent of the shares of the combined company, while IFF shareholders will own 44.6 percent.
Andreas Fibig, IFF’s CEO, is to be appointed Chairman and CEO of the new combined company. DuPont Executive Chairman, Ed Breen, will join the Board as a DuPont appointee and become its Lead Independent Director in June 2021. He is noted as having been instrumental in integrating the businesses.
N&B business is reported as delivering robust results to date. “We generate about US$6 billion in annual sales, with an industry-leading 24 percent EBITDA margin. Additionally, we have a very strong R&D pipeline and generate approximately 25 percent of our sales from products introduced within the last five years. N&B has more than 10,000 employees spread globally, with 70 manufacturing sites and more than 30 technology and innovation centers across four continents. We serve more than 10,000 customers with a diversified portfolio in Food & Beverage, Health & Biosciences and Pharma Solutions,” says Breen.
“We all know how the food, beverage, health and wellness industries are evolving. We've seen the pace of change, the growing consumer expectation for products across the range of industries we serve that are healthier, naturally sourced and more sustainable. Together, we will be able to deliver the solutions that enable these products faster, better and more efficiently than anyone in the industry and we'll be able to quickly penetrate a larger segment of each market than any of our competitors,” he adds.
In terms of the post-closing growth rates, Fibig projects that the N&B business is right in the middle of organic growth rates that IFF has had historically at 3 to 5 percent. “We still have some of the cross-selling synergies from the Frutarom side, so we’ll probably be at the higher end of that 3 to 5 percent range. On top of that, you get the cross-selling, the US$400 million of the combined deal, above the 5 percent range.”
Among its leveraged growth opportunities, the new company expects to explore potential areas of expansion within the clean label and alternative protein categories. Today, IFF provides a flavor, seasoning, taste modulation and natural color for plant-based burgers, while N&B provides the texturants, binders, enzymes and plant-based proteins.
“We do see a vastly growing trend with health and natural. We are very well positioned with our board portfolio. The enzymes used in the bakery industry are a great example. I think with the whole plant-based trend, we are well positioned with our soy proteins with additional ingredients. Using our full suite of offerings and then combining that with IFF’s naturals offering puts us in a position to really grow this trend. In my view, there is no other company positioned like us and this combination to serve this trend going forward,” concludes Matthias Heinzel, President of Nutrition & Health at DuPont.
By Benjamin Ferrer
