IFF’s DuPont takeover could prove a tasty dish

Food flavourings giant IFF has just spent $26.2bn on DuPont’s nutrition and biosciences business in its bid to become the giant of the flavourings and nutrients industry.

E-numbers and food additives © iStockphotos

The deal combines lab wizardry with manufacturing knowhow

Food flavourings giant IFF has just spent $26.2bn on DuPont's nutrition and biosciences business.

International Flavors & Fragrances (IFF) is on the warpath again, says the Financial Times A year after spending $7.3bn to buy Frutarom Industries as part of its plan "to consolidate the food flavouring sector", it is splashing out another $26.2bn to buy DuPont's nutrition and biosciences business. The new company, which will be run by IFF's CEO, aims to be a "giant" in the flavourings and nutrients industry. It will have an enterprise value of $45bn and annual revenues of $11bn, employing 23,000 people and providing ingredients for "products from vegan burgers to salad dressing to laundry detergent".

While International Flavors & Fragrances has been expanding through acquisitions, DuPont has been going in the opposite direction as it looks to "salvage shareholder value" in the face of a US-China trade war that has "crimped growth", says Bloomberg. Even though DuPont merged with Dow only three years ago, the "chemical giant" created by that alliance has already undergone a large degree of fragmentation. Not only was the Dow division spun off earlier this year, but this was followed by the agriculture business, leaving the conglomerate now split into three parts.

A mixture of flavours

The two companies could work better together as one, with IFF's "lab wizardry" and DuPont's manufacturing know-how encouraging big clients "to buy more natural colourings, emulsifiers and so forth", says Liam Proud on Breakingviews. Still, it looks as though DuPont's shareholders are getting the "juiciest morsels", with a $7.3bn special cash payment as well as "55.4% of the combined business". The deal will have a "slightly off odour" for IFF, who will not only be swallowing a much larger company at an "expensive valuation", but also adding a "slug of debt" as well.

The deal is also bad news for Irish firm Kerry, whom IFF pipped to the prize, says The Irish Times. Kerry had hoped that taking over part of DuPont's business would have helped it "expand in healthy bacteria strains, ingredients found in dietary supplements, cheese and bakery products, and nutritional products that prevent or treat diseases. Having lost out on a deal that would have been one of the biggest carried out by a listed Irish company, the stock has fallen by 4% this week.

Recommended

Royal Mail will deliver for investors – here's how to play it
Trading

Royal Mail will deliver for investors – here's how to play it

Royal Mail Group has found its feet in the past 18 months and looks cheap. Matthew Partridge looks at how to trade the shares.
14 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Three hidden gems from Japan’s overlooked stockmarket
Share tips

Three hidden gems from Japan’s overlooked stockmarket

Professional investor Eiji Saito of JPMorgan’s Japan Small Cap Growth & Income fund picks three promising stocks from Japan's vibrant but under-resear…
13 Sep 2021
Change is coming to the German stockmarket as the Dax index expands
European stockmarkets

Change is coming to the German stockmarket as the Dax index expands

Germany's benchmark Dax stock index is to expand to 40 companies from the current 30 amid a broader shakeup of the German stockmarket.
10 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
How you can profit from the power of the grey pound
Share tips

How you can profit from the power of the grey pound

Higher life expectancy and surging asset prices have proved a boon for the baby-boomer generation, which has accumulated vast wealth. Younger generati…
10 Sep 2021