DSM-Firmenich merger unites science and innovation in cash and shares mega deal

Amanda Gerla

31 May 2022 — Netherlands-based DSM is set to merge with Firmenich, the world’s largest privately-owned taste and perfumery company, to form DSM-Firmenich. The move is set to boost annual sales by €500 million (US$537 million), particularly by combining DSM’s Food & Beverage and Firmenich’s Taste & Beyond businesses.

At inception, DSM shareholders will own in aggregate 65.5% of DSM-Firmenich and Firmenich shareholders will own in aggregate 34.5% of DSM-Firmenich, receiving €3.5 billion (US$3.8 billion) in cash.

The merger is expected to be completed in the first half of 2023, and the new Swiss-Dutch global company will be domiciled in Switzerland and listed on Euronext Amsterdam. DSM-Firmenich will benefit from complementary capabilities across fragrance, taste, texture and nutrition, fueled by world-class science. 

In an announcement, the companies said this was a “merger of equals of two iconic companies – both with a track record of growth and a shared commitment to positively impact people and the planet – to create DSM-Firmenich.” The companies say they are “uniquely positioned to anticipate and address evolving consumer needs.”

“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,” underscores Thomas Leysen, chairman of the DSM Supervisory Board.

The merger will bring 28,000 people together as part of DSM-Firmenich.Breakthrough innovation
Firmenich’s leading global Perfumery and Ingredients business will expand further into Beauty through the addition of DSM’s Personal Care & Aroma business. The merged company also plans to form a new “global-scale partner” to serve the F&B industry, combining DSM’s Food & Beverage and Firmenich’s Taste & Beyond businesses.

The new combined businesses will be joined by DSM’s high-performing Health, Nutrition & Care and Animal Nutrition & Health businesses.

“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,” says Gilbert Ghostine, CEO of Firmenich.

Revenue crunch
The merger will bring an “attractive” annual run rate synergy potential of €350 million (US$ 375 million) adjusted EBITDA with a projected mid-term 5-7% sustainable organic sales growth per annum, driven by innovation. 

The companies anticipate a mid-term adjusted EBITDA margin of 22-23%, supported by synergies. To realize the total synergies, DSM-Firmenich expects to incur one-time implementation costs of approximately €250 million (US$269 million). Given the complementary nature of the merger, the integration execution risks are considered to be limited.

“High-performing” businesses
The company’s Health, Nutrition & Care, with revenues of €2.2 billion (US$2.4 billion) is set to continue its development as an end-to-end partner, utilizing its portfolio for customers in dietary supplements, early-life nutrition, pharmaceuticals, medical nutrition, nutrition improvement and medical devices markets. 

Food & Beverage and Taste & Beyond, with combined revenues of €2.7 billion (US$ 2.9 billion), will form a global-scale partner to the food and beverage industry with extensive capabilities in taste, nutrition and functionality, 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 F&B with more natural and sustainable ingredients, including market and innovation leadership in naturals and clean label products; plant-based foods; and in supporting a “superior taste experience.” 

A key focus lies in enhancing food’s nutritional profile with vitamins, probiotics, lips and salt and sugar reduction.

The Perfumery & Beauty segment, with combined revenues of €3.3 billion (US$3.5 billion), will be the “foremost creator” of fragrances and beauty products and a global aroma ingredients business that together have “leadership in renewable, natural, proprietary biodegradable and biotechnology-derived ingredients.”Firmenich expects to finish its fiscal year ending June 2022 with organic revenue growth above 9%.

“Unprecedented” opportunities
The combined company’s extensive global footprint will provide customers with access to an “unprecedented network” of R&D, as well as creation and application capabilities. These will be informed by local consumer preferences across regional and local hubs around the world.

“Both businesses have successful track records of investing in and delivering groundbreaking innovations that create and reshape markets. Opportunities from new pioneering and complementary digitally powered business models will build upon the 125+ year heritage of each company in purpose-led scientific discovery and innovation,” the companies note. 

DSM-Firmenich will have dual headquarters in Kaiseraugst, Switzerland and Maastricht, Netherlands. 

• 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)

By Andria Kades

This feature is provided by FoodIngredientsFirst’s sister website, NutritionInsight.

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