When the deal closes in the first quarter of 2021, DuPont shareholders will own 55.4% of the new company's shares and receive $7.3 billion in cash.
The new company will be a major supplier of products that include soy proteins, probiotics, enzymes, and ingredients for creating scents and tastes for consumer products, would have an estimated 2019 revenue of more than $11 billion and pre-tax earnings of $2.6 billion, according to a joint statement from the two companies. It will be called IFF and be based in New York.
"For the time being, it remains business as usual until the close of the transaction," a DuPont spokesman told the Delaware Business Times on Sunday. "DuPont N&B and IFF will continue to operate as independent entities. Over the long term, the combined company will create growth opportunities and shareholder value."
The combination would put more IFF products in fast-growing segments of the food market such as plant-based meat alternatives where DuPont brings its DD 2.10% soy protein and binders to the table and IFF offers coloring and flavors that are used in those products. The companies also produce scents for household cleaning products and capsules for the pharmaceutical industry.
DuPont became a standalone company earlier this year following the breakup of DowDuPont Inc. into three companies "“ Dow Inc. (the materials-science business); Corteva (the agriculture business); and DuPont (the specialty-sciences company). DuPont's Nutrition & Biosciences unit accounted for 28% of the company's revenues for the first nine months of the year.
After the deal closes, IFF's new board will be made up of the seven current IFF directors and six appointed by DuPont, including DuPont Executive Chairman Ed Breen who will serve as lead independent director starting June 1, 2021.
"DuPont and IFF share long and successful histories of customer-driven innovation and cultures of excellence, which is why I am confident that N&B will be well-positioned for its next phase of growth. I am pleased to join the Board of the combined organization and remain involved in unlocking the potential of this new company," Breen said in a statement. "We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for N&B. I am excited about the future of the new company and all the opportunities it has for long-term value creation."
IFF expects to realize cost savings of about $300 million on a run-rate basis by the end of the third year post-closing. The two companies said the cost synergies will be driven by "procurement excellence, streamlining overhead and manufacturing efficiencies." They did not address whether that will include employee reductions, but they did say that "the new company will draw upon the best talent from both organizations" and that IFF and N&B will form an integration office composed of leaders from both companies.
The deal is structured as a Reverse Morris Trust transaction, which allows a company that wants to spin off assets to avoid taxes on any gains, if all legal requirements are met.