Can the DSM Firmenich merger deliver on its synergistic promise?

The deal rivals that of the €20bn-plus (£17bn) merger in 2021 between International Flavors & Fragrances (IFF) and DuPont’s Nutrition and Biosciences division.

Dutch and Swiss companies have been talking a lot about synergies which they say will save at least €175m (£149m), while not cutting too many 28,000 jobs and maintaining annual spending R&D costs higher than most competitors at 9.3% of revenue – around €700m (£145m).

In comparison, Givaudan devotes 8.4% of its turnover to R&D, IFF/DuPont 6.1% and Symrise 5.9%.

The deal may not close until the first half of 2023 – regulator approval pending – but DSM Firmenich, as the €40bn (£34bn) entity will become known, is already live and getting started with a bespoke website​outlining its science, innovation, sustainability and purpose-driven vision.

A vision he says goes “to positively impact people and the planet…Leveraging world-class science and complementary capabilities in fragrance, taste, texture and nutrition.”

Botanical benefits

Robert Harwood, PhD, CEO of Oxford-based CPL Business Consultants, sees many positives in the union, one being a complementary merger of the companies’ plant processing capabilities.

“A driver in that case it is access to new technologies, particularly in terms of fermentation and extraction“,Dr. Harwood told NutraIngredients.

DSM sees itself as an organic company and diversifying the product portfolio it can offer in specific areas is a strategic goal. The botanical activity will complement DSM’s organic activity. It acquired Amyris in 2021 – IHis chosen route was more in the direction of fermentation than extraction.

Dr Harwood added: DSM has expertise in biologics and protein separation that complements Firmenich’s technologies in natural plant-based ingredients.

There are also synergies in the range of extraction technologies employed, using a wide range of natural materials. These include chromatographic separation, distillation techniques and supercritical fluid extraction.

June 13 investor presentation

In a just seen investor presentationScheduled for next week, DSM Firmenich has provided more details on its plans and focus areas.

The new entity expects that 60% of revenue synergies achieved by 2026 will come from Food & Beverage/Taste & Beyond, 25% from Health, Nutrition & Care and 15% from Perfumery & Beauty.

“New generation” food supplementslike erasers “taking advantage of the taste experience” will be called.

Medical Nutritionwill be targeted with “Improved protein/nutrition content and attractive taste profiles”.

Plant-based foods is another focus area that will leverage a “a robust portfolio of flavors, taste modulation, texture, enzymes, cultures, micronutrients, functional ingredients and differentiated protein sources”.

Functional power supply​ will see “taste, texture and nutrition portfolios” leveraged to deliver “wellness attributes” in the form of functional foods and functional drinks.

Dairyimprovement will be through “Premium taste profiles, texture and health attributes.”

During the presentation, Firmenich highlighted their current work on nutrition, including reducing sugar, salt and fat; immune system, microbiome balance and inner well-being; development of consumer-preferred plants and plant-based proteins, including alternative meats.

The Swiss company also highlighted its use of AI in ingredient development and deepening digital engagement.

“Firmenich will benefit from DSM’s presence in many areas where it is not active, such as nutritional ingredients – they already sell flavors for nutritional products but not nutritional ingredients“,observed Dr. Harwood of the CPL.

DSM, whose animal and pet nutrition accounts for almost half of its turnover, followed by food and beverages (15%) and dietary supplements (15%), the union coincides with its final exit from the bulk petro and chemicals business that was central to its foundation after selling off its engineering and protective materials businesses.

Destroy a Juggernaut

To achieve its goals, DSM Firmenich will have an impressive arsenal of resources, including 28,000 employees based in dual headquarters in Maastricht in the Netherlands and Kaiseraugst in Switzerland, as well as hundreds of other locations around the world.

This includes 2,000 researchers in 15 R&D centers globally working with some 16,000 primarily food/nutritional ingredient and fragrance technology patents in 2,600 patent families.

Other operating units include 40 design centers, 78 application labs, 70 premix sites and 88 manufacturing sites.

By uniting, the companies expect an annual revenue increase of €500m (£426m), with EBITDA “synergy” returns of around €350m (£298.5m). million) per year by 2026.

He expects 5-7% growth and 22-23% EBITDA contributions company-wide and a one-time merger cost of 250 million euros ($213 million). pound sterling).

DSM Firmenich will be listed on the Euronext Amsterdam stock exchange.

Valerie J. Wallis