DSM and Firmenich To Merge, Becoming An Innovation Partner in Nutrition, Beauty and Well-Being

Amanda Gerla

HEERLEN, Netherlands and GENEVA, Switzerland — DSM and Firmenich announce that they have entered into a business combination agreement (the “BCA”) to establish the leading creation and innovation partner in nutrition, beauty and well-being (“DSM-Firmenich”). The combination will bring together Firmenich’s unique leading Perfumery and Taste businesses, its world-class science platforms and associated co-creation capabilities with DSM’s outstanding Health and Nutrition portfolio and renowned scientific expertise. The new company will have four high-performing and complementary businesses, each with leading positions and underpinned by world-class science.

DSM-Firmenich will benefit from complementary capabilities across fragrance, taste, texture and nutrition, fueled by world-class science. The company will have unparalleled proprietary capabilities to partner with customers to fulfill their ambitions. DSM-Firmenich will be able to better anticipate and to address the needs of today’s conscious consumers who prioritize sustainability, health and well-being.

The merger of DSM-Firmenich will further accelerate innovation for the industry and generate new growth opportunities for customers. It will form a new global-scale partner to serve the food and beverage industry, combining DSM’s Food & Beverage and Firmenich’s Taste & Beyond businesses. Firmenich’s world-leading global Perfumery and Ingredients business will expand further into Beauty through the addition of DSM’s Personal Care & Aroma business. These new combined businesses will be joined by DSM’s high-performing Health, Nutrition & Care and Animal Nutrition & Health businesses.

The combined company’s extensive global footprint will provide customers with access to an unprecedented network of R&D, creation and application capabilities, informed by local consumer preferences, across regional and local hubs around the world. Both businesses have successful track records of investing in and delivering ground-breaking innovations that create and reshape markets. Opportunities from new pioneering and complementary digitally-powered business models will build upon the 125+ year heritages of each company in purpose-led scientific discovery and innovation.

DSM-Firmenich will bring together both companies’ relentless commitment to sustainability across the value chain, and in doing so help to drive environmental, social and governance leadership globally. Sustainability considerations have long been embedded within both companies’ strategies and DSM-Firmenich combines two companies with shared values and longstanding action on climate change, embracing nature and care for people.

The compelling strategic rationale for this combination is reflected in the attractive synergy potential, resulting in double-digit EPS accretion1 and an enhanced strategic position across the markets in which DSM-Firmenich will operate.

Thomas Leysen, Chairman of the DSM Supervisory Board, commented: “DSM-Firmenich will bring together leading creativity and cutting-edge science and innovation. Together we will be able to better serve the needs of customers and deliver compelling growth and returns. However, successful mergers require more than complementary capabilities or compelling financials; they not only require balanced governance and a respect of the interests of all stakeholders, but they crucially require shared values. My colleagues and I are convinced we have all of those elements, and it is for this reason that the Supervisory Board of DSM concluded that this is truly a merger which is in the interest of all stakeholders.”

Patrick Firmenich, Chairman of Firmenich, commented: “The combination of DSM and Firmenich is transformational, and brings together two culturally aligned and iconic businesses, each with over 125 years’ heritage of innovation. Our shared purpose and common values, combined with our highly complementary capabilities gives me confidence we can accelerate our growth further through innovation and new creations. I am confident that for all stakeholders of the future DSM-Firmenich business, the most exciting times are still to come.”

Geraldine Matchett and Dimitri de Vreeze, Co-CEOs of DSM, commented: “We are honored to propose the combination of DSM and Firmenich, and the opportunity to bring together 28,000 passionate people with a common commitment to enable our customers to realize their ambitions as we better the health and well-being of people and the planet. Together DSM-Firmenich will enjoy complementary capabilities, including one of the largest creation communities in the industry, enabling us to unlock new opportunities for customers as well as position us to deliver enhanced long-term growth and shareholder value, sustainably. By coming together, we will establish a company where anyone, anywhere in the world, wishing to make a positive impact should aspire to work.”

Gilbert Ghostine, CEO of Firmenich, added: “This is the natural next step in Firmenich’s evolution. We are excited to build on Firmenich’s tradition of entrepreneurial excellence and create a global leader that will be able to bring breakthrough innovation and technologies to our customers, addressing the most pressing needs of consumers. DSM shares our purpose-led values and, like us, creates value for its customers through its science-based approach and pioneering technologies, making a real difference to people and planet. I am excited that the legacy of Firmenich will shape a new industry leader that will innovate for a better world.”

The combination of Firmenich and DSM will establish the leading creation and innovation partner in nutrition, beauty and well-being with four high-performing and complementary businesses, each with pioneering, leadership positions:

  • Perfumery & Beauty, with combined revenues of €3.3bn, will be the foremost creator of positive fragrances and beauty products and a global aroma ingredients business that together have leadership in renewable, natural, proprietary biodegradable and biotechnology-derived ingredients. Firmenich’s leading global Perfumery and Ingredients business will expand into Beauty through the addition of DSM’s Personal Care & Aroma business to delight consumers with superior sensorial experiences and differentiated performance, delivering active benefits, addressing clean & hygiene, health & reassurance and emotion & well-being
  • Food & Beverage / Taste & Beyond, with combined revenues of €2.7bn, will form a global-scale partner to the food and beverage industry with extensive capabilities in taste, nutrition and functionality in order to provide delicious, nutritious and sustainable products that deliver unique and superior consumer experiences. The new business will lead the diet transformation in creating healthier, great-tasting, accessible food and beverages with more natural and sustainable ingredients, including market and innovation leadership in naturals and clean label products; in plant-based foods; and in supporting a superior taste experience whilst enhancing food’s nutritional profile (for example with vitamins, probiotics, and lipids and reducing sugar and salt)
  • Health, Nutrition & Care, with revenues of €2.2bn, will continue its development as an end-to-end partner providing customized quality solutions that support the health of people at every life stage. It will aim to keep the world’s growing population healthy through a broad portfolio of sustainable, science-backed innovative solutions, addressing consumers’ health and lifestyle needs, for customers in the dietary supplements, early-life nutrition, pharmaceuticals, medical nutrition, nutrition improvement for the under-nourished, and medical devices markets
  • Animal Nutrition & Health, with revenues of €3.3bn, will continue to focus on specialty science- and technology-driven solutions to the ever-increasing demand for protein such as meat but also eggs, fish and dairy, while also alleviating the pressure on the planet’s finite natural resources. The business is leading a robust and achievable transformation to make animal farming worldwide radically more sustainable by empowering farmers with essential products such as vitamins. It is one of the world’s largest suppliers of eubiotics, enzymes, and mycotoxin risk management, as well as a wide range of impactful innovations such as methane inhibitor Bovaer® and fish-oil algae-alternative Veramaris®

The four businesses will be supported by a world-class foundation in science and technology, a vertically integrated portfolio of nutrition, natural and renewable ingredients, as well as best-in-class business functions. Both DSM and Firmenich have successful track records of delivering ground-breaking innovations that create and reshape markets for growth (for example Bovaer®, Veramaris®, biodegradable fragrance encapsulation, renewable fragrance materials, sugar and salt reduction, plant-based foods, fermentation processes for human milk oligosaccharides, and lipids). DSM-Firmenich will operate at the highest safety and quality standards, with strong regional manufacturing presence ensuring supply continuity, resilience and trust for our customers. DSM-Firmenich will continue the two companies’ relentless commitment to sustainability across the value chain.

1 Earnings impact compares pro forma DSM-Firmenich EPS assuming full disposal of Materials (in line with the pro forma framework for DSM-Firmenich financials as presented on page 32 of the accompanying presentation introducing the merger dated May 31, 2022), relative to DSM Group EPS excluding Materials.

Both companies bring scientific excellence across a network of 15 global R&D facilities, addressing all major and emerging disciplines in the markets served. The combination brings together leading capabilities in and a continued commitment to discovery, scale-up and commercialization including a portfolio of more than 16,000 patents across approximately 2,600 patent families. At DSM-Firmenich’s core will be deep science capabilities, with significant cross-fertilization opportunities in bioscience, fermentation, green chemistry, receptor biology, sensory perception and formulation, augmented by analytical sciences, data sciences and artificial intelligence.

The merger will build on both companies’ track record of delivering groundbreaking innovations; for DSM, currently structured around its four platforms of Precision, Prevention, Protein and Pathways. Firmenich research delivers groundbreaking innovations addressing differentiated creation, sustainability, and wellness.

DSM-Firmenich will bring locally differentiated co-creation and innovation to best serve global companies, regional champions, and emerging brands and start-ups to bring new ideas to market with agility. The combination will enable further competitive advantages through critical mass in creation and application capabilities in all regional and local hubs worldwide to address specific consumer preferences and serve customers anywhere they operate.

Firmenich’s leadership in developing creations and applications that delight consumers, while leveraging superior consumer insights to bring attributes that consumers value, will be enriched by DSM’s outstanding health and nutrition portfolio, capabilities and expertise. Both companies have pioneering and complementary digitally-powered business models (for example Hologram Sciences, Sustell™, Verax™ Scentmate™, and d-lab™) where there is potential to cross-fertilize and accelerate growth.

DSM-Firmenich’s unique co-creation capabilities will be exemplified by their perfumers and flavorists, enabling partnerships with customers to fulfil their ambitions. These artisans already harness an industry-leading ingredient palette, building on breakthrough technologies to drive true differentiation for customers. Under DSM-Firmenich these experts will continue to be supported by strong investment in internal research and development teams, delivering the sensorial experiences and unique signatures that help customers delight consumers.

DSM-Firmenich will be a global company where anyone who has a desire to make a positive impact in the world should aspire to work. The merger will bring together two purpose-led, growing companies with shared values and an engaging culture that puts people first.

28,000 passionate, talented and diverse people are the basis of the success of both companies, where caring for people’s safety, health and well-being has long been core to the culture of both companies and will remain so. The merger will bring the opportunity to combine talent, best practices and learnings from across both companies to create a stronger environment for employees to thrive. DSM and Firmenich are bound by a shared dedication to create and innovate, to deliver value for customers, and to contribute to the health and well-being of people and the planet. It will also create new and varied career development opportunities with ongoing commitments to maintain strong community connections everywhere DSM-Firmenich operates.

With a unique legacy as responsible businesses, DSM-Firmenich will build on a pioneering track record of environmental and social action over many decades. DSM-Firmenich will uphold each company’s world-class ESG performance of acting on climate change, embracing nature and caring about people throughout its value chain. These actions are backed by industry-leading credentials. The United Nations Sustainable Development Goals (UN SDGs) are embedded within both companies’ strategies with a focus on generating positive and measurable impact demonstrated by, amongst other initiatives, DSM’s food system commitments and Firmenich’s commitment to reducing inequalities in the workplace as well as addressing the global sanitation crisis through the deployment of its malodor technologies. Both companies have a strong history of and reputation for operating to the highest international public company standards.

DSM-Firmenich’s leadership anticipates sustainable mid-single-digit organic sales growth moving to the 5-7% range over the medium term and high single-digit adjusted EBITDA growth, supported by growth synergies and innovation opportunities. This is coupled with a resilient 20%+ adjusted EBITDA margin at the outset and moving to the 22-23% range over the medium term, supported by synergies.

The combination is expected to realize recurring run-rate pre-tax synergies of approximately €350m adjusted EBITDA per year by 2026, including an uplift of around €500m in annualized revenues as a result of accelerating innovation with customers. Substantial revenue synergy potential is expected from the integration of DSM’s Food & Beverage and Firmenich’s Taste & Beyond businesses. To realize the total synergies, DSM-Firmenich expects to incur one-time implementation costs of approximately €250m. Given the complementary nature of the merger, the integration execution risks are considered to be limited.

DSM-Firmenich will be a highly free cash flow generative company with disciplined capital allocation and a commitment to maintaining a strong investment grade credit rating, with Net Debt/EBITDA of 1.5-2.5x over the medium term, and a dividend policy based on a payout ratio of 40-60% of adjusted earnings.

DSM-Firmenich’s Board of Directors, under Swiss governance, will comprise three nominees from the Firmenich shareholders, seven independent directors from DSM’s Supervisory Board, as well as one independent director from the existing Firmenich Board and one new independent member.

The DSM-Firmenich Board and leadership roles will include:

  • Thomas Leysen, current Chairman of the Supervisory Board of DSM, to be appointed Chairman of DSM-Firmenich and Patrick Firmenich, currently Chairman of Firmenich, to be appointed Vice Chairman
  • Geraldine Matchett and Dimitri de Vreeze, currently Co-CEOs of DSM, to be appointed Co-CEOs of DSM-Firmenich (including CFO and COO responsibilities respectively)
  • Emmanuel Butstraen, currently President of Taste & Beyond at Firmenich to be appointed Chief Integration Officer

DSM-Firmenich will have a balanced leadership team of talented individuals, representing its diversity, skillset, and ambitions.

DSM-Firmenich will be domiciled in Switzerland with the seat of the principal in Kaiseraugst (CH) and listed on Euronext Amsterdam. The effective tax rate of DSM-Firmenich is expected to be approximately at the level of DSM today.

DSM-Firmenich will have a dual headquarter in Switzerland (Kaiseraugst) and the Netherlands (Maastricht). With regards to the businesses and research:

  • Perfumery & Beauty will be led out of Geneva (CH)
  • Food & Beverage / Taste & Beyond will be led out of Delft (NL)
  • Health, Nutrition & Care will be led out of Kaiseraugst (CH)
  • Animal Nutrition & Health will be led out of Kaiseraugst (CH)
  • Perfumery, Ingredients and Taste Research will be led out of Geneva (CH)
  • Global biotechnology research and network will be led out of Delft (NL)

At inception, DSM shareholders will own in aggregate 65.5% of DSM-Firmenich and the various shareholders of Firmenich will own in aggregate 34.5% of DSM-Firmenich and receive €3.5bn in cash (subject to potential adjustments). This valuation reflects a DSM market capitalization of €25.3bn2 and implied enterprise value adjusted for the Materials business (“EV”) of €21.6bn3.  Firmenich expects to finish its fiscal year ending June 2022 with organic revenue growth above 9%4 (CHF 4.6bn+) and to deliver Adj. EBITDA above CHF 900m, growing double-digit year-over-year on an organic basis5 or above CHF 910m when including the 12-month pro forma impact of acquisitions.6

Once the merger is completed, DSM-Firmenich, a newly incorporated Swiss-domiciled company, will hold the DSM and Firmenich businesses and DSM-Firmenich will be listed on Euronext Amsterdam.

About Firmenich

Firmenich is the world’s largest privately-owned fragrance and taste company and has been family-owned for 127 years. The Swiss company specializes in perfumes, flavors, and ingredients and is renowned for its world-class research as well as leadership in sustainability. Firmenich delivered CHF 4.5bn of sales in the calendar year 2021 with Adjusted EBITDA margin of c. 20%.

About DSM

DSM has transformed during its 150+ year history into today’s health, nutrition & bioscience global leader. The Dutch-Swiss company specializes in nutritional ingredients for food and feed with proven world-leading bioscience capabilities and an international network of high-quality manufacturing sites that underpin a business model of global products, local solutions and personalization and precision. For Health, Nutrition & Bioscience (excluding Materials), DSM delivered €7.3bn of sales in the calendar year 2021, with adjusted EBITDA of €1.4bn and an adjusted EBITDA margin of 19%.


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