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

Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The MoneyWeek Podcast: how to not lose money to inflation and financial repression
Investment strategy

The MoneyWeek Podcast: how to not lose money to inflation and financial repression

Merryn talks to Peter Spiller of the Capital Gearing Trust about how he navigated the last extraordinary year; what he's buying now; and how he plans …
16 Apr 2021
UK mid-cap stocks look forward to life after lockdown
UK stockmarkets

UK mid-cap stocks look forward to life after lockdown

The FTSE 250 hit an all-time high at the end of last week, as investors look to a post-lockdown recovery.
16 Apr 2021

Most Popular

Lab-grown meat: how “moo’s law” will drive innovation
Soft commodities

Lab-grown meat: how “moo’s law” will drive innovation

Jim Mellon and Anthony Chow, co-founders of Aim-listed Agronomics, explain why they believe that “cellular agriculture” will benefit from massive long…
16 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021