IFF to Merge with DuPont’s Nutrition + Biosciences

New York (NY) / Wilmington (DE). (ddp) IFF International Flavors + Fragrances Inc. and DuPont announced that they have entered into a definitive agreement for the merger of IFF and DuPont’s Nutrition + Biosciences (N+B) business in a Reverse Morris Trust transaction. The deal values the combined company at USD 45.4 billion on an enterprise value basis, reflecting a value of USD 26.2 billion for the N+B business based on IFF’s share price as of December 13, 2019. Under the terms of the agreement, which has been unanimously approved by both Boards of Directors, DuPont shareholders will own 55.4 percent of the shares of the new company and existing IFF shareholders will own 44.6 percent. Upon completion of the transaction, DuPont will receive a one-time USD 7.3 billion special cash payment, subject to certain adjustments.

The combination of IFF and N+B creates a global leader in high-value ingredients and solutions for global Food + Beverage, Home + Personal Care and Health + Wellness markets, with estimated 2019 pro forma revenue of more than USD 11 billion and Ebitda of USD 2.6 billion, excluding synergies. The complementary portfolios will give the company leadership positions across key Taste, Texture, Scent, Nutrition, Enzymes, Cultures, Soy Proteins and Probiotics categories. The combined company’s global reach and enhanced set of capabilities will enable the creation of innovative solutions to respond to customer demands and increasing consumer preferences for natural, healthier, and «better for you» products.

«The combination of IFF and N+B is a pivotal moment in our journey to lead our industry as an invaluable innovation and creative partner for our customers. Together, we will create a leading ingredients and solutions provider with a broader set of capabilities to meet our customers’ evolving needs,» said IFF Chairman and CEO, Andreas Fibig. «With highly complementary portfolios, we will have global scale and leading positions in key growth categories to capitalize on positive market trends, drive strong profitable growth for our shareholders and create opportunities for our employees. I have been impressed by N+B’s management team, which shares our culture and values, and we look forward to welcoming them to the IFF family.»

«DuPont and IFF share long and successful histories of customer-driven innovation and cultures of excellence, which is why I am confident that N+B will be well-positioned for its next phase of growth. I am pleased to join the Board of the combined organization and remain involved in unlocking the potential of this new company,» said Ed Breen, Executive Chairman of DuPont. «We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for N+B. I am excited about the future of the new company and all the opportunities it has for long-term value creation.»

Strategic Rationale

The new company will be ideally equipped to deliver in-demand differentiated solutions for more natural, healthy products to an expanded customer base spanning both large multinationals and fast-growing small and medium-sized customers.

Best-in-Class Innovation Portfolio Creates Differentiated Offering and Compelling Value Proposition – The company will be an immediate leader in the rapid consumer-driven industry evolution toward healthier, «better for you» products. With leading R+D and applications development capabilities and an expanded customer base, the combined company is expected to significantly increase customer speed to market, create new efficiencies in product development and provide critical consumer insights for next-generation products.
Leading Positions Across High-Value Added Ingredient Categories – The company will have #1 or #2 positions across attractive Taste, Texture, Scent, Nutrition, Cultures, Enzymes, Soy Proteins and Probiotics categories.
Highly Attractive Financial Profile – Shareholders will benefit from a highly profitable business with strong cash generation. The company expects to generate attractive top-line growth and enhanced margins with further benefit from cost synergies and revenue growth opportunities. The combined company will maintain IFF’s current dividend policy.
Shared Culture and Vision, a Strategic Asset to Execution – IFF and N+B are customer-focused organizations with cultures that emphasize science and creativity. The combined company will benefit from the best of both organizations’ experienced leaders and talented teams. Our shared commitment to sustainability, along with the combination of our complementary capabilities, will allow us to positively shape the evolution of the industry.

«My team and I are excited about the opportunity to build the new company and create a new world-class leader. Our expertise together with IFF will best position us to address customer needs and ultimately redefine our industry,» said N+B President, Matthias Heinzel. «IFF’s innovation and customer-centric culture is remarkably similar to ours and we look forward to working with them for a smooth integration of our two organizations.»

Governance and Management

Upon closing, the new company’s Board of Directors will consist of 13 directors: 7 current IFF directors and 6 DuPont director appointees until the Annual Meeting in 2022, when there will be 6 directors from each company. Andreas Fibig will continue to be the Chairman of the Board and an IFF appointee, he will also continue as Chief Executive Officer. The company will be headquartered in New York. DuPont Executive Chairman, Ed Breen, will join the board of the combined company as a DuPont appointee and will serve as Lead Independent Director starting June 1, 2021.

The new company will draw upon the best talent from both organizations. IFF and N+B will form an Integration Office composed of leaders from both companies.

Financial Benefits

The combined company will have a strong financial profile, including:

Pro forma revenues of more than USD 11 billion based on fiscal year 2019 estimated results
Adjusted Ebitda margin of ~23 percent pre-synergies and ~26 percent with run-rate cost synergies based on fiscal 2019 pro forma estimated results
Expected revenue growth rate in the mid-single digits over the long-term
Strong cash flow generation supporting an investment grade credit profile
Commitment to the continuation of IFF’s historical dividend policy

IFF expects to realize cost synergies of approximately USD 300 million on a run-rate basis by the end of the third year post-closing. These cost synergies will be driven by procurement excellence, streamlining overhead and manufacturing efficiencies. In addition, the combined company’s target is to deliver more than USD 400 million in run-rate revenue synergies, which would result in more than USD 175 million of Ebitda, driven by cross-selling opportunities and leveraging the expanded capabilities across a broader customer base.

IFF is committed to maintaining an investment grade rating and plans to delever from approximately 4.0x at transaction close to below 3.0x by year two following closing. Following the close of the transaction, IFF expects that substantially all of the debt of the combined company will be pari passu.

Guidance

IFF is affirming its existing 2019 full-year guidance. The company reconfirms its full-year projections for sales to be between USD 5.15 billion and USD 5.25 billion with adjusted EPS to be between USD 4.85 and USD 5.05 and adjusted EPS excluding amortization to be between USD 6.15 and USD 6.35.

DuPont reconfirms its expectations for total annual revenue of approximately USD 21.5 billion and an adjusted EPS range of USD 3.77 to USD 3.82. DuPont expects operating Ebitda to be at the low end of the previously provided range, primarily driven by temporary supply chain disruptions in Safety + Construction (S+C) and Electronics + Imaging (E+I).

Transaction Details

The combination will be executed through a Reverse Morris Trust transaction. Upon completion, DuPont shareholders will own 55.4 percent of the combined company and IFF’s shareholders will own 44.6 percent. In addition, at the time of completion, DuPont will receive a one-time USD 7.3 billion cash payment, subject to adjustment. The transaction is expected to be tax-free to DuPont and its shareholders for U.S. federal income tax purposes.

Financing and Approvals

The transaction is subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals. As part of the transaction, IFF’s largest shareholder, Winder Investments, has agreed to vote in favor of the transaction. The parties target closing the deal by the end of the first quarter of 2021. IFF and N+B have obtained fully-committed debt financing from Morgan Stanley and Credit Suisse. The combined company is committed to maintaining an investment grade rating.

About IFF International Flavors + Fragrances

At IFF International Flavors + Fragrances Inc., we’re using Uncommon Sense to create what the world needs. As a collective of unconventional thinkers and creators, we put science and artistry to work to create unique and unexpected scents, tastes, experiences and ingredients for the products our world craves.

About DuPont

DuPont (NYSE: DD) is a global innovation leader with technology-based materials, ingredients and solutions that help transform industries and everyday life. Our employees apply diverse science and expertise to help customers advance their best ideas and deliver essential innovations in key markets including electronics, transportation, construction, water, health and wellness, food and worker safety. More information can be found at dupont.com.

About DuPont Nutrition + Biosciences

DuPont Nutrition + Biosciences applies expert science to advance market-driven, healthy and sustainable solutions for the food, beverage, dietary supplement and pharmaceutical industries. We also use cutting-edge biotechnology across a range of markets to advance bio-based solutions to meet the needs of a growing population, while protecting our environment for future generations. We are innovative solvers who help our customers turn challenges into high-value business opportunities. For more information please visit dupontnutritionandhealth.com.