Royal DSM NV will merge with Swiss company Firmenich to form the largest flavours & fragrances company. The new company will have annual revenue of more than 11 billion euros ($12 billion), the companies said Tuesday.
The deal is the latest stage in DSM’s ongoing transformation. DSM said last September it was to fully focus on health, nutrition and bioscience and that it has started a review of strategic options for its materials businesses.
The Firmenich family will own about 34.5% of the new company and expect to remain long-term shareholders, Firmenich Chief Executive Officer Gilbert Ghostine said on a call with reporters.
While Ghostine called the deal a “true merger of equals,” DSM’s shareholders will control DSM-Firmenich via two-thirds of its equity. Owners of the Swiss company agreed to receive about 3.5 billion euros cash as they swap their shares for the remaining minority stake.
The combined company will get about a quarter of its revenue from each of its product categories: perfumes and fragrances; food and flavors; human health and nutrition and animal nutrition, DSM Co-CEO Geraldine Matchett told reporters. She will lead the new company along with the other Co-CEO of DSM, Dimitri de Vreeze.
The companies say the new group could lead to an organic sales growth of 5% to 7% per year and annual cost savings of €350 million.
DSM will get a cash injection to help fund the deal from the sale of its engineering materials business to German chemicals group Lanxess AG and private equity firm Advent International for 3.7 billion euros including debt.
That divestment, also announced Tuesday, is one of the last steps in the Dutch company’s strategic shift.
The boards of both companies unanimously approved the transaction, as did Firmenich’s shareholders. Completion is expected in the first half of 2023, and it’s conditional on approval from DSM investors.
Executives said they don’t expect the combination to raise any competition issues with regulators. Goldman Sachs and BDT & Co. Europe advised Firmenich. DSM’s advisers are Centerview Partners and JPMorgan.