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.
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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.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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