DuPont de Nemours Inc. (DD) - Get DuPont de Nemours, Inc. Report shares bumped higher in pre-market trading Monday after the industrial group agreed a $26.2 billion merger with International Flavors & Fragrances Inc. (IFF) - Get International Flavors & Fragrances Inc. (IFF) Report
DuPont will use what's known as a 'Reverse Morris Trust' arrangement to complete the deal, spinning off and merging its Nutrition and Biosciences with IFF in a deal that both reduces it overall tax liability and creates a company worth around $45.4 billion. DuPont will own 55.4% of the combined group, the companies said, to teh 44.6% share for IFF, and also receive a $7.3 billion cash payment when the deal is closed next year.
IFF beat Ireland's Kerry Group, which has been considered the leading contender for the deal since DuPont began weighing a potential sale of its nutrition division in August.
“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,” said DuPont chairman Ed Breen.
“We conducted a very thorough process leading us to the selection of IFF as the preferred strategic partner for N&B," Breen added. "I am excited about the future of the new company and all the opportunities it has for long-term value creation.”
DuPont shares edged 0.6% higher in early trading Monday to change hands at $65.14 each, trimming its six-month decline to around 9.6%. IFF shares, meanwhile, were seen 6.8% lower at $124.91 each.
"As management promised, DD's work to unlock value from its portfolio has resulted in what we believe is a solid transaction with the merging of its N&B segment with IFF in a (Reverse Morris Trust) transaction," said BMO Capital Markets analyst, who carried an outperform rating with an $82 price target on the stock ."The $45.4 billion entity ... will have leading platforms across a host of solid growth end markets with the combination driving solid cost and growth synergies over time."