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

Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Three clean energy stocks for your portfolio
Share tips

Three clean energy stocks for your portfolio

Professional investor Christian Roessing of the Pictet Clean Energy Fund highlights of his three favourite stocks at the forefront of the clean energy…
25 Jan 2021
The MoneyWeek Podcast: let's talk about bubbles
Stockmarkets

The MoneyWeek Podcast: let's talk about bubbles

Merryn and John talk about the many obvious signs of a bubble in certain assets, including tech stocks, TikTok, and stock-trading 12-year olds. It's c…
22 Jan 2021
Eternal growth: how to invest in the future of the drinks industry
Share tips

Eternal growth: how to invest in the future of the drinks industry

Humans have been dabbling in tasty beverages for millennia. Jonathan Compton assesses the key trends in the sector and recommends seven hard- and soft…
22 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021