Kerry Group has lost out in its bid to buy the nutrition business of US chemicals group DuPont, sending shares in the company down 3 per cent.
Rival International Flavors and Fragrances (IFF) has reached a $26.2 billion (€23.5 billion) agreement with DuPont for the business, with Kerry missing out on a deal that would have been one of the biggest carried out by an Iseq listed company.
Kerry has long wanted to expand in healthy bacteria strains, ingredients found in dietary supplements, cheese and bakery products, and nutritional products that claim to have some sort of role in assisting in disease treatment or prevention. IFF emerged as a strong contender to win the deal last week, sources said.
Kerry did not issue a statement.
The deal is the biggest ever for New York-based IFF, which makes flavours and fragrances for food, beverages, personal care and household products.
The new company will have an enterprise value of $45.4 billion, with DuPont shareholders getting a 55.4 per cent stake and IFF shareholders getting 44.6 per cent, the companies said in a statement Sunday.
The transaction is structured as a Reverse Morris Trust, reflecting the desire of DuPont chairman Ed Breen and chief executive Marc Doyle for a tax-efficient option to reward shareholders after the nutrition business had wallowed within the diversified company.
DuPont will receive a one-time cash payment of $7.3 billion once the deal is completed, expected in the first quarter of 2021. IFF chief executive Andreas Fibig will be chairman and chief executive of the new company, with Mr Breen as the lead independent director starting in June 2021. The board will have 13 directors, including seven from IFF, until 2022, when the total drops to an evenly split 12.
IFF’s last big acquisition was in the food-flavouring industry, when it bought Israel’s Frutarom Industries for $7.1 billion last year. That transaction is still absorbing management time and has increased leverage.
Subject to approval
The deal is subject to approval from IFF shareholders. IFF has already secured the support of its biggest shareholder, 19 per cent holder Winder Investment, the companies said in the statement.
On a pro forma basis for 2019, the new company would have revenue of $11 billion for 2019 and $2.6 billion in earnings before interest, taxes, depreciation and amortisation. The companies expect more than $300 million in cost savings by the third year after closing.
The purchase would make "strategic sense, allowing IFF to offer a more complete product suite to a broader customer base," according to Mark Astrachan, an analyst at Stifel, who said last week the deal would make it the largest global speciality ingredients company.
Both companies reiterated their financial guidance for 2019.
Greenhill and Co and Morgan Stanley served as IFF's financial advisers, with Cleary Gottlieb Steen and Hamilton LLP as legal counsel. DuPont's financial advisers were Credit Suisse and Evercore, with legal counsel from Skadden, Arps, Slate, Meagher and Flom LLP. – Bloomberg
