Delaware-based company DuPont is reportedly creating a massive new $45.4 billion consumer goods entity through the merger of its food and nutrition business with New York-based flavors and fragrances and cosmetic actives producer International Flavors & Fragrances (IFF).
The merger of the food and nutrition unit and IFF was announced by DuPont on Sunday. Based on the transaction prices, the deal essentially value's DuPont's food and nutrition unit at around $26.2 billion. Under the deal, DuPont will still retain a majority stake in the newly formed company, which is expected to generate annual revenues of more than $11 billion.
Both DuPont and IFF mentioned in their joint statement released over the weekend that they expect massive cuts to operational costs as a result of the merger. The firms estimate that the merger could save them around $300 million within the next three years.
The firms believe that the merged company should allow them to steal more market shares in the lucrative global ingredients market. Both companies aim to have the new entity take a leading position in the ingredients market, particular in the soy proteins, enzymes, and probiotics segments.
DuPont and IFF pointed out that they will be focusing their efforts on creating healthier and more natural flavors, which has apparently become a major trend amongst consumer goods manufacturers worldwide. The companies stated that natural flavors are becoming the dominant segment in the global food flavoring industry.
IFF currently develops flavors and fragrances for millions of different consumer brands sold worldwide. According to its website, the company has around 33,000 major customers from different countries around the world. It also has hundreds of manufacturing and research facilities spread across the globe.
DuPont's food and nutrition business, on the other hand, is a spinoff of the former chemical giant DowDuPont, which had on into three separate companies. The companies mainly focus on separate key segments, namely Dow Inc for material sciences, DuPont for specialty goods, and Corteva for agricultural products.
Both companies expect to finalize the merger by early 2021. The deal is of course still subject to regulatory approval and the approval of IFF shareholders. Under the deal, IFF's currently CEO, Andreas Fibig, will serve as the chairman and chief executive of the new entity.
Prior to making their decision to merge, Irish food giant Kerry Group came very close to beating IFF for the deal. According to reports citing sources close to the matter, the European company was reportedly attempting to acquire DuPont's nutrition division.
