Shares in Kerry Group fell by close to 3% after it lost out in the race to buy the nutrition division of American conglomerate DuPont, in what would have been a potentially transformative deal for the Tralee-based food business.
US group International Flavors & Fragrances (IFF) said it has reached agreement to buy DuPont’s nutritions business for $26.2bn (€23.5bn) as it continues to expand in the fast-growing food ingredients interests.
Kerry had, reportedly, been the leading contender for some time to buy the DuPont nutrition business, with one report saying IFF had landed the deal at the 11th hour. Kerry would have leap-frogged CRH as the largest Irish stock market-listed business if it had succeeded with the acquisition.
It was reported last week that Kerry had enlisted Goldman Sachs to advise it on what would have been the largest ever deal conducted by an Iseq-listed company.
Kerry Group has long since wanted to expand in healthy bacteria strains, ingredients found in dietary supplements, cheese and bakery products, and nutritional products that claim to have some sort of role in assisting in disease treatment or prevention. IFF emerged as a strong contender to win the DuPont deal last week.
In August, upon the publication of a strong set of first-half earnings and revenues, Kerry boss Edmond Scanlon said the group would continue to seek acquisition opportunities, having already spent nearly €330m on two North American purchases in the first half of the year.
At the time, while Mr Scanlon said Kerry’s main acquisition activity would be focused on strengthening its key taste and nutrition division in developing markets, he was guarded when asked about links to DuPont.
There isn’t a transaction that happens where our name isn’t connected. We don’t guide on M&A, but acquisitions form an important part of our business.
"We are very, very good at identifying, evaluating, integrating and generating value from acquisitions and we don’t rule anything in or out,” he said.
IFF’s Dupont transaction will create a new company comprised of the bidder’s assets and DuPont’s nutrition business. The new company will have an enterprise value of $45.4bn, with DuPont shareholders getting a 55.4% stake and IFF shareholders getting 44.6%.
The deal is the biggest ever for New York-based IFF, which makes flavours and fragrances for food, personal care, and household products. It comes as businesses are tapping into so-called wellness products as consumers become increasingly health-conscious.
DuPont’s unit specialises in products such as sweeteners and emulsifiers to dairy cultures and dietary fibres, and has seen growth in areas such as plant-based meats and probiotics.
Shares of IFF, however, fell nearly 8%. The deal looks expensive, according to Bloomberg Intelligence analyst Christoper Perrella.
“They are really reaching. Frutarom is just a year old, and that acquisition didn’t go as well as expected.”
Last year, IFF bought Israel’s Frutarom Industries for $7.1bn as it chased industry leader Givaudan.
With DuPont struggling this year, analysts questioned the new company’s growth prospects. DuPont chairman Ed Breen said there were “three highly motivated bidders”.