DSM and Firmenich in mega-merger

DSM and Swiss-based flavours and fragrances house Firmenich have agreed to merge. The deal, which is expected to close in 1H 2023, is valued at about $19.6 billion. DSM-Firmenich would have about €11.4 billion/year in sales, comparable to IFF after its combination with DuPont’s Nutrition and Biosciences business early last year.

The two firms have a combined network of 15 R&D facilities and a portfolio of more than 16,000 patents across. Although the merger has been positioned as one of equals, DSM shareholders will own 65.5% of the new firm. It will have four main businesses:

* Perfumery & Beauty, with combined revenues of €3.3 billion/year, combining Firmenich’s Perfumery & Ingredients business with DSM’s Personal Care & Aroma business

* DSM’s Food & Beverage plus Firmenich’s Taste & Beyond (€2.7 billion/year), which brings together their activities in food and beverage

* Health, Nutrition & Care (€2.2 billion/year), which will be active in the nutrition, dietary supplements, pharmaceuticals and medical devices markets

* Animal Nutrition & Health (€3.3 billion/year), supplying eubiotics, enzymes and mycotoxin risk management, among other things

“At DSM-Firmenich’s core will be deep science capabilities, with significant cross-fertilisation opportunities in bioscience, fermentation, green chemistry, receptor biology, sensory perception and formulation, augmented by analytical sciences, data sciences and artificial intelligence,” the two companies said.

Organic sales are expected to grow at 5-7% over the medium term, with high single-digit adjusted EBITDA growth. The EBITDA margin is expected to move to 22-23%, supported by run-rate pre-tax synergies of about €350 million/year of adjusted EBITDA by 2026. One-time implementation costs of about €250 million will be taken to realise synergies, particularly from the integration of the food and beverage business.

Thomas Leysen, current chairman of the DSM supervisory board, will be chairman, with Firmenich chairman Patrick Firmenich as vice-chairman. DSM co-CEOs Geraldine Matchett and Dimitri de Vreeze, will also be co-CEOs at the new firm, including CFO and COO responsibilities respectively. Emmanuel Butstraen, currently president of Taste & Beyond at Firmenich is to be chief integration officer.

Shortly before this, DSM had agreed to sell its Engineering Materials business to Advent International and Lanxess for an enterprise value of €3.85 billion. This concluded the process of selling its Materials businesses that began with the sale of DSM Protective Materials to Avient in April.