A merger deal of $45.5 billion was signed between the American companies, International Flavors & Fragrances Inc. (IFF) and DuPont Inc. (DuPont) on December 15, 2019. Under the agreement, DuPont and IFF will hold 55.4% and 44.6% of the total shares of the new company, respectively.
Settlement of the Deal and its Benefits
DuPont, a nutrition and biosciences (N&B) manufacturer having net assets $26.2 billion, will share capital assets worth $45 billion of the new company. As per IFF’s report, a manufacturer of flavor and fragrance products, “Industrial materials maker DuPont will also receive a one-time cash payment of $7.3 billion upon closing of the deal.”
Ed Breen, the Executive Chairman of DuPont, expressed, “DuPont and IFF share long and successful histories of customer-driven innovation and cultures of excellence… We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for nutrition & biosciences.”
In the backdrop of the merger, Fibig, IFF’s CEO stated, “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.”
The merger will help IFF save costs of about $300 million and provide tax relief. According to IFF, “The combination will be executed using a tax-efficient structure called a Reverse Morris Trust. Such transactions let a company avoid a big tax bill by spinning off a unit that it wants to divest and simultaneously merging it with another company.”
The Strategy of the New Company
The combination of IFF and N&B is expected to earn more revenue as it could produce high-value ingredients and solutions for global Food & Beverage, Home & Personal Care, and Health & Wellness markets. According to DuPont estimation, “The merger would generate revenue more than $11 billion and EBITDA of $2.6 billion” from the various sectors of its products excluding synergies.
As per DuPont, the strategic aim of the new company is 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.”
After the closing of the deal, the new company will consist of 13 directors on the board, seven from IFF, and six from DuPont till Annual Meeting in 2022. DuPont’s CEO, Ed Breen will join the board of the new company and serve as the Lead Independent Director. The present CEO of IFF, Andreas Fibig, will lead the new company and continue to be the Chairperson of the board.
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