IFF to expand within nutrition segment following groundbreaking DuPont merger
16 Dec 2019 --- After weeks of speculation, IFF and DuPont have entered into a definitive agreement for the merger of IFF and 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 major tie-up, which will simply be called IFF, is projected to create a global leader in high-value ingredients and solutions for global Food & Beverage, Home & Personal Care and Health & Wellness markets, with an estimated 2019 pro forma revenue of more than US$11 billion and EBITDA of US$2.6 billion, excluding synergies.
“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. Each of our businesses has 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,” Dan Turner, Reputation and Media Relations Leader at DuPont, tells NutritionInsight.
An IFF spokesperson adds that the combined company’s global reach and enhanced set of capabilities will enable the creation of innovative solutions to help its customers grow their brands. “Our focus now is building the best possible company for our customers, employees and shareholders,” they note.
IFF has previously specialized in taste and scent.The new company’s strategic rationale revolves around delivering 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 spokesperson adds that clean label is also a key trend the new company will be addressing.
Specifically, the company highlights the rapid consumer-driven industry evolution toward healthier, “better-for-you” products as an area for focus. “An example of these products are sustainable solutions including natural, clean label and alternative protein products. These preferences are driven by strong global mega-trends for sustainability, healthy living and an increased focused on wellness,” explains Turner.
With leading 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 next-generation products.
Additionally, the company says it will have #1 or #2 positions across the attractive Taste, Texture, Scent, Nutrition, Cultures, Enzymes, Soy Proteins and Probiotics categories.
Currently, IFF’s business profile is 6 percent focused on nutrition and ingredients, with the company primarily working with taste (57 percent) and scent (37 percent). Meanwhile, N&B has a 57 percent focus on F&B and 37 percent on health and biosciences, which includes probiotics and human milk oligosaccharides (HMOs).
Terms of agreement
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 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.
DuPont N&B is active in food and beverage, as well as in health and bioscience.
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.
In July, N&B opened a new state-of-the-art probiotics fermentation unit at its Rochester, New York, facility. Construction of the unit was completed in March as part of an overall US$100 million investment to expand the company’s probiotics capacity.
N&B also recently launched a flagship dairy enzyme that facilitates a total sugar reduction of 35 percent or more. This is while generating prebiotic dietary fiber in situ through the natural conversion of lactose.
Last week, DuPont’s research revealed how brain scans can be a key tool in enabling reformulators to create a product that consumers respond positively to at all levels of consciousness. This was part of a six-part TED talk series given by DuPont scientists, including topics on enzymes for more sustainable consumption, alternatives to antibiotics in livestock production, reducing environmental impact in oilfields and tackling the worldwide obesity pandemic by utilizing the human gut microbiota.
By Katherine Durrell, with additional reporting from Benjamin Ferrer
