DuPont’s nutrition business will merge with IFF

DuPont, reconfigured through the historic merger and demerger with Dow, is changing once again. The 200-year-old chemical company will leave the food additive business by combining its nutrition and industrial biosciences division with International Flavors & Fragrances in a transaction that values the division at $26.2 billion.

The sale is yet another step in the radical remaking of DuPont. The process began in 2011 when it purchased the Danish food ingredient company Danisco. DuPont later spun off its businesses in fluorochemicals, titanium dioxide, and other industrial chemicals into a new firm, Chemours.

Change accelerated in 2015 when Edward Breen, a DuPont board member who once led the conglomerate Tyco, was named CEO. He immediately began talks with Dow about a merger and demerger that would shuffle businesses between the two companies and spin off new versions of DuPont and Dow, plus Corteva Agriscience. That process wrapped up in June.

Nutrition & Biosciences is the largest of the new DuPont’s four divisions, and sending it to IFF will shrink DuPont’s annual sales by almost 30%. Analysts will be watching to see if DuPont will now reach a steady state or if more change is in store.

Breen indicated last year that he wants to divest several more businesses with combined annual sales of about $2 billion. They include biobased 1,2-propanediol, solar-panel raw materials, and sulfuric acid regeneration services.

Industry watchers note that Breen, who is now DuPont’s executive chairman, has a penchant for breaking up companies, having done so earlier with Tyco. On a conference call before Christmas to discuss the IFF deal, several stock analysts referred to DuPont as RemainCo, implying that they see it as a portfolio of businesses to be managed rather than a cohesive company.

Vincent Andrews, an analyst with Morgan Stanley, asked Breen if he needs to wait until the deal with IFF closes before considering subsequent large transactions. “I’m going to try to get some downtime over this holiday,” he joked in response.

Breen went on to say that he likes the businesses that remain in DuPont but that his team is able to do more than one thing at a time. “We’ve been very transparent that we’re going to actively manage the portfolio,” he said. “We’re obviously not afraid to make moves like this.”

For IFF, merging with DuPont’s $6.8 billion-per-year nutrition division will more than double annual sales and add large-volume food ingredients such as proteins and probiotics to a company that has traditionally focused on specialized flavors and fragrances.

Executives on the call noted that the two firms have almost no overlap in products but significant overlap in customers. Using the example of a plant-based burger, they explained that IFF sells seasonings, taste-modulation products, antioxidants, and natural colors, while the DuPont division sells texturants, binders, proteins, and emulsifiers.

Similarly, for the laundry detergent industry, IFF provides fragrances and encapsulation products, while DuPont sells enzymes and microbial-control products. “In each of these cases, together we will be able to deliver all of these products in one solution to our customers,” said Matthias Heinzel, president of DuPont’s Nutrition & Biosciencesdivision.