Royal DSM is merging with Swiss flavours and fragrance group Firmenich, as DSM looks to complete a 20-year transition away from petrochemicals and materials, and to focus more on food and nutrition categories.
The transformed DSM brings a portfolio of biotechnology, human and animal health and nutrition to the partnership, whereas Firmenich’s strengths are in organic chemistry and process engineering with its fragrance and food & beverage businesses.
The deal will create a company with an estimated value of around €40 billion (US$42.3 billion). DSM shareholders will own 65.5% of the new firm, while Firmenich shareholders will initially own 34.5% and receive €3.5 billion (US$3.7 billion) in cash. Gilbert Ghostine, Firmenich’s Chief Executive, said that the merger will create a ‘powerhouse of science and innovation’. The joint enterprise will invest a combined €700 million (US$740 million) into R&D annually, with over 2000 scientists working on innovation.
A new food and beverage unit will combine DSM’s ingredients business with Firmenich’s taste business, which has focused on plant-based foods and food sugar reduction, using AI and digitalisation to drive innovation.
At the same time, DSM has also agreed to sell the last of its traditional chemicals businesses, engineering polymers, to German chemicals group Lanxess and private equity company Advent International. Already, it had sold its protective materials business to US specialist polymers firm Avient in April, and its resin and coatings business went to Covestro in 2021. In 2002 it shed its petrochemicals business. The company was originally formed by the Dutch government to mine the country’s coal reserves.
Last year, DSM said it wanted to focus its business on supporting sustainability and environmental protection and will seek to streamline its business towards that goal.
The flavour and fragrances sector is dominated by just 5 big players, who between them have more than 75% market share, according to Jefferies Equity Research. A series of mergers and acquisitions in the past couple of years have been driven by consumer trends towards more ‘natural’ products. The DSM Firmenich merger follows the merger of DuPont’s nutrition and biosciences business with International Flavors & Fragrances (IFF) last year.
In its latest development, DSM and Firmenich have also jointly announced the future leadership team for DSM-Firmenich. The new company’s Executive Committee will have a balanced team of talented individuals drawn from both DSM and Firmenich and representing the diversity, skillset, and ambitions of the combined company. The existing executive management teams of DSM and Firmenich will remain unchanged until the completion of the merger, which is expected ultimately in the first half of 2023. Each company remains committed to driving the ongoing performance of their respective businesses until then and to the subsequent successful handover of responsibilities wherever relevant.
DSM-Firmenich will bring together a world-class foundation in science and technology with deep expertise across a global network of 15 R&D facilities. DSM-Firmenich will also have 4 high-performing and complementary businesses, all with pioneering, leadership positions and each led by a member of the future Executive Committee. These include the Perfumery & Beauty, incorporating Firmenich’s Fragrance and Ingredients divisions and DSM’s Personal Care & Aroma business. Another division includes the combined Food & Beverage/Taste & Beyond business with extensive capabilities in taste, nutrition and functionality. Another division is the Health, Nutrition & Care which focuses on the development of customised quality end-to-end solutions that support the health of people at every life stage. Finally, is the Animal Health & Nutrition division which will focus on developing solutions to satisfy the increasing demand for protein.
For more information, click on:
DSM Food & Beverage
