|DuPont has reached an agreement to merge its nutrition & biosciences business with International Flavors & Fragrances (IFF) in a deal that values the DuPont business at $26.2 billion. DuPont shareholders will own 55.4% of the shares of the combined company and existing IFF shareholders will own 44.6%. The deal will be structured as a Reverse Morris Trust transaction that will be tax-free to DuPont shareholders. Upon completion of the transaction, DuPont will also receive a one-time $7.3-billion special cash payment, subject to certain adjustments. IFF chairman and CEO Andreas Fibig will hold the same position at the combined company.
The companies aim to close the deal by the end of the first quarter of 2021. The transaction is subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals.
The combination of IFF and DuPont nutrition creates a global leader in high-value ingredients and solutions for global food and beverage, home and personal care, and health and wellness markets, with estimated 2019 pro-forma revenue of more than $11 billion and EBITDA of $2.6 billion, excluding synergies. IFF brings a leading position in flavors and fragrances and DuPont’s nutrition business has leading positions in enzymes, probiotics, soy proteins and cellulosics. The complementary portfolios will give the company “leadership positions across key taste, texture, scent, nutrition, enzymes, cultures, soy proteins, and probiotics categories.”
The combined company’s board will consist of 13 directors: 7 current IFF directors and 6 DuPont director appointees until the annual meeting in 2022, when there will be 6 directors from each company. The company will be headquartered in New York. 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 1 June 2021.
The combined company is projected to have a pro-forma revenue of more than $11 billion based on fiscal year 2019 estimated results. It is expected that the new company will achieve a revenue growth rate in the mid-single digits over the long term. IFF expects to realize cost synergies of approximately $300 million on a run-rate basis by the end of the third year post-closing. In addition, the combined company plans to deliver more than $400 million in run-rate revenue synergies, which would result in more than $175 million of EBITDA, driven by cross-selling opportunities and leveraging the expanded capabilities across a broader customer base.
Kerry Group (Tralee, County Kerry, Ireland) was also negotiating with DuPont for its nutrition unit, Bloomberg had previously reported. IFF’s last big acquisition was in the food-flavoring industry last year, when it bought Israel’s Frutarom Industries for $7.1 billion including debt.
DuPont reconfirmed expectations for total annual revenue of approximately $21.5 billion and an adjusted earnings-per-share range of $3.77-$3.82. DuPont said it now expects operating EBITDA to be at the low end of the previously provided guidance, primarily driven by temporary supply chain disruptions in the safety & construction (S&C) and electronics & imaging (E&I) segments.