Commentary

DuPont's Nutrition & Biosciences, ITT Merge To Create Olfactory Giant

The merger of IFF and DuPont Co.’s Nutrition & Biosciences (N&B) business, announced Sunday, will create a $45 billion entity catering to the disparate tastes and preferred scents of consumers worldwide. 

“The DuPont food and drug group -- which sold $6 billion of products such as artificial sweeteners, seaweed extracts, and the processed bean and soy proteins used in artificial meats -- is larger than artificial flavoring and perfumes maker IFF, which had $5 billion in sales last year, but IFF is acting as the acquirer,” Joseph N. DiStefano writes  for The Philadelphia Inquirer

New York-based IFF, which stands for International Flavors & Fragrances, defines  its purpose as “to redefine how we live in and care for the resources of our world.” 

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Its “mantra” is “Uncommon Sense.” It elaborates: “Rejecting convention to create what the world needs. Our international team uses artistry, science, and expertise to create unique and unexpected scents, tastes, experiences and nutrition for the products our world craves -- from global icons, to boutique innovations.”

Wilmington, Delaware-based DuPont, “which counts Kevlar and Styrofoam as clients, has been shaking up its business in recent years. The former giant DowDuPont is now three separate companies that focus on material sciences (now called Dow Inc.), agriculture (now dubbed Corteva) and specialty goods (DuPont). Aside from its nutrition unit, DuPont also focuses on products related to electronics, transportation and construction,” Michelle Toh reports  for CNN Business.

“Together, we will create a leading ingredients and solutions provider with a broader set of capabilities to meet our customers’ evolving needs. With highly complementary portfolios, we will have global scale and leading positions in key growth categories to capitalize on positive market trends,” IFF CEO Andreas Fibig, who will run the combined company, says  in the statement announcing the deal.

“The new entity will be based in New York. It is expected to be a global leader in high-value ingredients and solutions for food and beverage, home and personal care, and health and wellness markets. The newly-formed company will have attractive positions across key growth categories, which include taste, scent, texture, nutrition, enzymes, cultures, soy proteins and probiotics,” according to a Zacks Equity Research brief published  on Yahoo Finance.

DuPont executive chairman Ed Breen will join the board of the combined company and serve as lead independent director. The board will consist of seven members of IFF’s current board and six members, including Breen, chosen by DuPont.

“This creates the global leader across all the ingredients spaces. It’s the broadest portfolio by far, and we’ll have double the R&D of any other company in the industry,” Breen said Monday on CNBC’s “Squawk on the Street,” CNBC’s Amelia Lucas reports.

“Meat alternatives are one area that could benefit from the strength of the new company’s R&D division. DuPont produces the plant-based proteins used in meatless alternatives, while IFF creates the flavors and colors,” Lucas adds.

“DuPont’s soy protein and binders and IFF products including coloring and flavors all are used in those foods, which have been rapidly adding sales and exposure. The company also will make products including capsules for the pharmaceutical industry and scents for household cleaning products,” writes Austen Hufford for The Wall Street Journal.

“IFF said it will shave $300 million in yearly costs from both companies to help pay for the deal. IFF employs around 13,000 at 110 plants. DuPont employs about 10,000 people at 70 locations, including around 650 in Delaware,” the Inquirer’s DiStefano writes.

“The combined companies also hope to boost sales by $400 million by ‘cross-selling' products to each other’s customers, Matthew Miller, chemicals analyst at CRFA Research in New York, told clients in a short report. DuPont ‘has leading positions in enzymes, probiotics and soy proteins,’” DiStefano adds.

“IFF beat Ireland's Kerry Group, which has been considered the leading contender for the deal since DuPont began weighing a potential sale of its nutrition division in August,”  Martin Baccardax writes  for The Street.

“We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for N&B,” Breen added. “I am excited about the future of the new company and all the opportunities it has for long-term value creation.”

In other words, he likes the smell of it.

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