Mega merger: International Flavors & Fragrances triumphant in DuPont win

16 Dec 2019 --- In breaking news today, International Flavors & Fragrances (IFF) has entered into a definitive agreement for the merger with DuPont’s Nutrition & Biosciences (N&B) business. The deal values the combined company at US$45.4 billion on an enterprise value basis, reflecting a value of US$26.2 billion for the N&B business based on IFF’s share price as of December 13. The move is pegged as a “pivotal moment” for IFF’s ambitions to expand beyond flavors, with the integration of DuPont’s complementary portfolios expected to provide significant leverage across global categories of Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins and Probiotics categories.

Whether IFF is going to see a tectonic change depends on how the US-based manufacturer plans to engage customers with their new supply side behemoth. However, it is expected that the bold move by the flavor house will have significant implications for its competitors. The new merger comes at the heels of IFF’s takeover of Frutarom Savory Solutions (FAS) last May.

Under the terms of the agreement, which has been unanimously approved by both Boards of Directors, DuPont shareholders will own 55.4 percent of the shares of the new company and existing IFF shareholders will own 44.6 percent. Upon completion of the transaction, DuPont will receive a one-time US$7.3 billion special cash payment, subject to certain adjustments.

“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,” says Andreas Fibig, Chairman and CEO of IFF.

The merger is expected to be ideally equipped to deliver in-demand differentiated solutions for more natural “better for you” products to an expanded customer base spanning both large multinationals and fast-growing small and medium-sized customers. With elevated R&D and applications development capabilities and an expanded customer base, the combined company is expected to significantly increase customer speed to market, create new efficiencies in product development and provide critical consumer insights for healthy goods.

The new company will be headquartered in New York, US. DuPont Executive Chairman, Ed Breen, will join the board of the combined company as a DuPont appointee and will serve as Lead Independent Director starting June 1, 2021. IFF and N&B will form an Integration Office composed of leaders from both companies. 

IFF expects to realize cost synergies of approximately US$300 million on a run-rate basis by the end of the third year post-closing. These cost synergies will be driven by procurement excellence, streamlining overhead and manufacturing efficiencies. In addition, the combined company’s target is to deliver more than US$400 million in run-rate revenue synergies, which would result in more than US$175 million of EBITDA, driven by cross-selling opportunities and leveraging the expanded capabilities across a broader customer base.

The transaction is subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals. The parties target closing the deal by the end of the first quarter of 2021. 

FoodIngredientsFirst has reached out to both parties for comment.

By Benjamin Ferrer