Interview Synopsis

DSM & Firmenich – Announced Merger

  • Public Equity
  • Materials
  • Europe

Dutch specialty chemicals maker DSM delivered a near 11% jump in adjusted annual earnings last week, coming hot on the heels of its announced merger with fragrance and flavour (F&F) company Firmenich in June.* A former senior executive at Firmenich told Third Bridge Forum the deal smells like trouble given the potential “synergy” challenges between the two companies.

Air of doubt surrounds DSM-Firmenich merger 

In an Interview with Third Bridge Forum, the specialist said the new partnership is less a merger and more an acquisition by DSM given the number of senior management from DSM that are fronting the newly merged group. Though the specialist expects DSM to acquire or merge with a F&F company given the “gap” in its portfolio, they were surprised they chose a top three player rather than a “second tier” option.

The specialist told us that the most challenging part of the merger will be on the perfume and beauty side. This is due to DSM’s portfolio, which they believe is not necessarily as “in-depth [as] or complementary” to Firmenich’s business. The specialist is concerned by the lack of synergy and overlap between the two companies and gave it a 50/50 chance of success. This is in contrast to the recently announced IFF-DuPont merger, which the specialist gave a 65/35 chance of success, given International Flavors & Fragrances should be able to integrate DuPont faster. Despite their concerns, the specialist said reports of a EUR 350m adjusted EBITDA synergy target for DSM-Firmenich is “reasonable”. 

We also heard that the F&F industry could cease to “exist”. The specialist said this is due to companies like Givaudan, IFF and DSM “redefining the industry” by incorporating multiple solutions. However, we were told Symrise is bucking this trend and continuing to act as a traditional F&F company. 

The specialist also revealed the F&F industry is already feeling the impact of rising raw material prices. They said if there was a reduction in gas supply from Russia that forces chemical giant BASF to close its chemical complex in Ludwigshafen Verbund, then it could have a “double-digit” volume impact. Unlike previous manufacturing shutdowns caused by fires in Asia, the specialist said companies are unsure about how long gas restrictions could last, causing more uncertainty for the industry. 

Click here to access all the human insights in Third Bridge Forum’s “DSM & Firmenich – Announced Merger, Synergies & Competitive Landscape Impact” Interview. 

* Reuters

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