June 19, 2024

unic power

health life

Firmenich and DSM merger creates ‘unparalleled’ leader in nutrition, beauty and wellbeing

5 min read

The enlarged entity, called DSM-Firmenich, is ‘truly a merger of equals’ that will bring together two companies that place science at the heart of their businesses, are purpose-led and share ‘common values’, DSM Co-CEO Dimitri de Vreeze said during a conference call to discuss the plan this morning.

“This merger is about bringing two iconic companies together and creating an industry leader,”​ fellow DSM Co-CEO Geraldine Matchett noted.

Matchett and de Vreeze will continue as Co-CEOs of the combined business, with CFO and COO responsibilities respectively.

An €11.4bn taste and nutrition powerhouse

DSM-Firmenich will combine the respective strengths of both companies across the flavours, fragrances and nutritional ingredients segments.

In 2021, the two companies generated adjusted proforma EBITDA of €2.2bn on proforma sales of €11.4bn. The companies said the 20%+ adjusted EBITDA margin is expected to move to a 22-23% range over the medium term, supported by synergies.

When the merger is finalised, DSM-Firmenich will be arranged in four strategic business units: animal nutrition and health will account for 29% of sales; perfumery and beauty will generate 28% of revenue; health, nutrition and care will contribute 18% to the top line; while food & beverage / taste & beyond, will account for 24% of group sales.

The €2.7bn food and beverage unit will undergo the ‘biggest transformation’ as DSM’s and Firmenich’s capabilities are integrated, de Vreeze predicted. According to the company, it anticipates an annual sales uplift of circa €500m from combining DSM’s food & beverage and Firmenich’s taste & beyond businesses.

Food & beverage / taste & beyond will form a ‘global-scale partner to the food and beverage industry’ with ‘extensive capabilities’ in taste and nutrition focusing on ‘delicious, nutritious and sustainable’ products. “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,”​ the companies said.

Sales synergies step-up growth

The companies have a combined historical organic growth rate of 5%. However, management predicted this will increase as they leverage sales synergies to boost the growth outlook.

Mid-single digit underlying sales will be ‘gradually’ accelerated to a 5-7% range, supported by revenue synergies and R&D.

Placing the deal’s synergy value at circa €340m, Matchett revealed 50-60% of this will come from ‘growth’ as the company leverages sales synergies and the enhanced opportunities unlocked by ‘bringing our capacity together’. The combination is expected to realize recurring run-rate pre-tax synergies of approximately €350m adjusted EBITDA per year by 2026.

On cost savings, the Co-CEO said that the larger company will see some ‘economies of scale’ pointing to opportunities in the supply chain and procurement to cut costs. However, she continued, management ‘doesn’t see [cost synergies] being driven by big redundancies’.

R&D capacity and a ‘strong’ innovation pipeline

Insisting that this is a growth story, research and development will be a critical to the enlarged group’s future trajectory.

de Vreeze said DSM benefits from a ‘strong innovation pipeline driving sales four healthy people and planet’.

Meanwhile, Firmenich CEO Gilbert Ghostine said that the Swiss-based group’s focus on research and development leaves it ‘well-placed to capitalise on structural growth trends’ across areas like taste and fragrance.


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