Pitch Best Deal 2022: DSM and Firmenich merger

Name of the deal: DSM and Firmenich merger 
Date announced: 31 May 2022 
Date closed: Expected to be completed in the first half of 2023 
Published value: 18.33 billion euros, total market cap of the combined entity is 42 billion euros 
Buyer(s):  DSM and Firmenich 
Target: DSM-Firmenich 
Seller: DSM and Firmenich shareholders 

Involved firms and advisors 

Involved firms and advisors buy side:  
DSM: J.P. Morgan and Centerview Partners (M&A Advisory) Allen & Overy (Legal advisory Corporate M&A and Tax Advisory) 
Firmenich: BDT & Company and Goldman Sachs (M&A Advisory), Oberson Abels (Tax Advisory), Stibbe, Bar & Karrer, Davis Polk & Wardwell (Legal advisory Corporate M&A) 

Involved firms and advisors target:  
N.a. 

Involved firms and advisors sell side:  
DSM: J.P. Morgan and Centerview Partners (M&A Advisory) Allen & Overy (Legal advisory Corporate M&A and Tax Advisory) 
Firmenich: BDT & Company and Goldman Sachs (M&A Advisory), Oberson Abels (Tax Advisory), Stibbe, Bar & Karrer, Davis Polk & Wardwell (Legal advisory Corporate M&A) 

Pitch  

Brief description deal / Deal outline  
DSM, a Dutch science-based company in Nutrition, Health and Sustainable Living, and Firmenich, a Switzerland-based company active in the field of fragrances and flavourings, intend to merge into DSM-Firmenich to establish a leading creation and innovation partner in nutrition, beauty and well-being. The merger will be effected through a public offer for DSM shares in exchange for DSM-Firmenich shares and the contribution of Firmenich shares to DSM-Firmenich in exchange for DSM-Firmenich shares and €3.5 billion cash. DSM-Firmenich will be listed on Euronext Amsterdam. 

Why should this deal win the Award for Best Deal 2022?  
This deal is determined by skilled execution, complexity of the transaction, innovative structuring and an excellent strategy behind the transaction. 

This is one of the most iconic deals of the past years characterized by two committed multinationals, both with an impressive history, entering into a EUR42 billion merger of equals. The transaction consists of a public exchange offer for the shares in DSM, the contribution of Firmenich into DSM-Firmenich and a listing on Euronext Amsterdam of the DSM-Firmenich shares newly issued to DSM and Firmenich shareholders. In addition to the complexity of the structuring and the cross-border character of the transaction, the transaction has a strong strategic fit combining Firmenich’s unique leading Perfumery and Taste businesses, its world-class science platforms and associated co-creation capabilities with DSM’s outstanding Health and Nutrition portfolio and renowned scientific expertise.  

This deal is a one of a kind merger of equals between two iconic companies. On one side, a Dutch public company Koninklijke DSM N.V. with a listing on Euronext Amsterdam, which is a purpose-led global science-based company in health, nutrition and bioscience, applying science to improve the health of people, animals and the planet. On the other side, a Swiss family-owned company Firmenich International SA, which is a global company that specialises in fragrances, flavours and ingredients.  

The merger will bring together Firmenich’s unique leading Perfumery and Taste businesses, its world-class science platforms and associated co-creation capabilities with DSM’s outstanding Health and Nutrition portfolio and renowned scientific expertise. The new company will have four high-performing and complementary businesses, each with leading positions and underpinned by world-class science. DSM-Firmenich will benefit from complementary capabilities across fragrance, taste, texture and nutrition, fueled by world-class science. The company will have unparalleled proprietary capabilities to partner with customers to fulfill their ambitions.  

Deal rationale:  
DSM-Firmenich will form a new global-scale partner to serve the food and beverage industry, combining DSM's Food & Beverage and Firmenich's Taste & Beyond businesses. Firmenich's world-leading global Perfumery and Ingredients business will expand further into Beauty through the addition of DSM's Personal Care & Aroma business. These new combined businesses will be joined by DSM's high-performing Health, Nutrition & Care and Animal Nutrition & Health businesses. DSM-Firmenich will bring together both companies' relentless commitment to sustainability across the value chain, and in doing so will help to drive environmental, social and governance leadership globally. Sustainability considerations have long been embedded within both companies' strategies and DSM-Firmenich combines two companies with shared values and longstanding action on climate change, embracing nature and care for people. 

The compelling strategic rationale for this combination is reflected in the attractive synergy Potential. 

What is the impact of this deal for the company?  
It will form a new global-scale partner to serve the food and beverage industry, combining DSM’s Food & Beverage and Firmenich’s Taste & Beyond businesses. Firmenich’s world-leading global Perfumery and Ingredients business will expand further into Beauty through the addition of DSM’s Personal Care & Aroma business. These new combined businesses will be joined by DSM’s high-performing Health, Nutrition & Care and Animal Nutrition & Health businesses.  

Perfumery & Beauty, with combined revenues of €3.3bn, will be the foremost creator of positive fragrances and beauty products and a global aroma ingredients business that together have leadership in renewable, natural, proprietary biodegradable and biotechnology-derived ingredients. Firmenich’s leading global Perfumery and Ingredients business will expand into Beauty through the addition of DSM’s Personal Care & Aroma business to delight consumers with superior sensorial experiences and differentiated performance, delivering active benefits, addressing clean & hygiene, health & reassurance and emotion & well-being. 

Food & Beverage / Taste & Beyond, with combined revenues of €2.7bn, will form a global-scale partner to the food and beverage industry with extensive capabilities in taste, nutrition and functionality in order to provide delicious, nutritious and sustainable products that deliver unique and superior consumer experiences. The new business will lead the diet transformation in creating healthier, great-tasting, accessible food and beverages with more natural and sustainable ingredients, including market and innovation leadership in naturals and clean label products; in plant-based foods; and in supporting a superior taste experience whilst enhancing food’s nutritional profile (for example with vitamins, probiotics, and lipids and reducing sugar and salt). 

Health, Nutrition & Care, with revenues of €2.2bn, will continue its development as an end-to-end partner providing customized quality solutions that support the health of people at every life stage. It will aim to keep the world’s growing population healthy through a broad portfolio of sustainable, science-backed innovative solutions, addressing consumers’ health and lifestyle needs, for customers in the dietary supplements, early-life nutrition, pharmaceuticals, medical nutrition, nutrition improvement for the under-nourished, and medical devices markets. 

Animal Nutrition & Health, with revenues of €3.3bn, will continue to focus on specialty science- and technology-driven solutions to the ever-increasing demand for protein such as meat but also eggs, fish and dairy, while also alleviating the pressure on the planet’s finite natural resources. It is one of the world’s largest suppliers of eubiotics, enzymes, and mycotoxin risk management, as well as a wide range of impactful innovations such as methane inhibitor Bovaer® and fish-oil algae-alternative Veramaris®.  

DSM-Firmenich will have a dual headquarter in Switzerland (Kaiseraugst) and the Netherlands (Maastricht). With regards to the businesses and research: 

• Perfumery & Beauty will be led out of Geneva (CH);
• Food & Beverage / Taste & Beyond will be led out of Delft (NL); 
• Health, Nutrition & Care will be led out of Kaiseraugst (CH); 
• Animal Nutrition & Health will be led out of Kaiseraugst (CH); 
• Perfumery, Ingredients and Taste Research will be led out of Geneva (CH); and 
• Global biotechnology research and network will be led out of Delft (NL). 

What is the impact of this deal for the direct stakeholders?  
The merger will bring the opportunity to combine talent, best practices and learnings from across both companies to create a stronger environment for employees to thrive. The combined company's extensive global footprint will provide customers with access to an unprecedented network of R&D, creation and application capabilities, informed by local consumer preferences, across regional and local hubs around the world. 

A. Customers  
DSM-Firmenich will be able to better anticipate and to address the needs of today’s conscious consumers who prioritize sustainability, health and well-being. DSM-Firmenich will bring locally differentiated co-creation and innovation to best serve global companies, regional champions, and emerging brands and start-ups to bring new ideas to market with agility. The combination will enable further competitive advantages through critical mass in creation and application capabilities in all regional and local hubs worldwide to address specific consumer preferences and serve customers anywhere they operate. Firmenich’s leadership in developing creations and applications that delight consumers, while leveraging superior consumer insights to bring attributes that consumers value, will be enriched by DSM’s outstanding health and nutrition portfolio, capabilities and expertise. Both companies have pioneering and complementary digitally-powered business models (for example Hologram Sciences, Sustell™, Verax™ Scentmate™, and d-lab™) where there is potential to cross-fertilize and accelerate growth. DSM-Firmenich’s unique co-creation capabilities will be exemplified by their perfumers and flavorists, enabling partnerships with customers to fulfil their ambitions. These artisans already harness an industry-leading ingredient palette, building on breakthrough technologies to drive true differentiation for customers. Under DSM-Firmenich these experts will continue to be supported by strong investment in internal research and development teams, delivering the sensorial experiences and unique signatures that help customers delight consumers. 

DSM and Firmenich are bound by a shared dedication to create and innovate, to deliver value for customers, and to contribute to the health and well-being of people and the planet.  

B. Employees  
DSM-Firmenich will be a global company where anyone who has a desire to make a positive impact in the world should aspire to work. The merger will bring the opportunity to combine talent, best practices and learnings from across both companies to create a stronger environment for employees to thrive.  

It will also create new and varied career development opportunities with ongoing commitments to maintain strong community connections everywhere DSM-Firmenich operates.  

What is the impact of this deal on society?  
DSM-Firmenich will bring together both companies' relentless commitment to sustainability across the value chain, and in doing so help to drive environmental, social and governance leadership globally. Sustainability considerations have long been embedded within both companies' strategies and DSM-Firmenich combines two companies with shared values and longstanding action on climate change, embracing nature and care for people. 

A. Sustainability
in the broadest sense: good for people (healthy products) and planet (from an environmental perspective) 
DSM-Firmenich will bring together both companies’ relentless commitment to sustainability across the value chain, and in doing so help to drive environmental, social and governance leadership globally. Sustainability considerations have long been embedded within both companies’ strategies and DSM-Firmenich combines two companies with shared values and longstanding action on climate change, embracing nature and care for people.  

With a unique legacy as responsible businesses, DSM-Firmenich will build on a pioneering track record of environmental and social action over many decades. DSM-Firmenich will uphold each company’s world-class ESG performance of acting on climate change, embracing nature and caring about people throughout its value chain. These actions are backed by industry-leading credentials. The United Nations Sustainable Development Goals (UN SDGs) are embedded within both companies’ strategies with a focus on generating positive and measurable impact demonstrated by, amongst other initiatives, DSM’s food system commitments and Firmenich’s commitment to reducing inequalities in the workplace as well as addressing the global sanitation crisis through the deployment of its malodour technologies. Both companies have a strong history of and reputation for operating to the highest international public company standards.  

B. Research & Development  
The combined company’s extensive global footprint will provide customers with access to an unprecedented network of R&D, creation and application capabilities, informed by local consumer preferences, across regional and local hubs around the world. Both businesses have successful track records of investing in and delivering ground-breaking innovations that create and reshape markets. Opportunities from new pioneering and complementary digitally powered business models will build upon the 125+ year heritages of each company in purpose led scientific discovery and innovation.  

The merger will build on both companies’ track record of delivering groundbreaking innovations; for DSM, currently structured around its four platforms of Precision, Prevention, Protein and Pathways. Firmenich research delivers groundbreaking innovations addressing differentiated creation, sustainability, and wellness. Both DSM and Firmenich have successful track records of delivering ground-breaking innovations that create and reshape markets for growth (for example Bovaer®, Veramaris®, biodegradable fragrance encapsulation, renewable fragrance materials, sugar and salt reduction, plant-based foods, fermentation processes for human milk oligosaccharides, and lipids). At DSM-Firmenich’s core will be deep science capabilities, with significant cross-fertilization opportunities in bioscience, fermentation, green chemistry, receptor biology, sensory perception and formulation, augmented by analytical sciences, data sciences and artificial intelligence. 

What was most complex about this deal?  
This deal involves complex structuring to create DSM-Firmenich, a Swiss-Dutch company with dual headquarters. Its complexity is demonstrated by the involvement of multiple jurisdictions. Moreover, the transaction consists of a public exchange offer for the DSM shares (1:1), the contribution of the Firmenich shares to DSM-Firmenich against the issuance of DSM-Firmenich shares and €3.5 billion in cash and a listing of the DSM-Firmenich shares on Euronext Amsterdam. 
 

Deal structure  
The deal was structured as a merger of equals, where the end-result following completion should be that DSM shareholders would hold in total 65.5% of the share capital in DSM-Firmenich and the Firmenich shareholders would hold in total 34.5% of the share capital in DSM-Firmenich, in addition to receiving a cash payment. This, in combination with the complexity of the applicable laws and regulations (see below), lead to the legal structure consisting of three steps: (i) public exchange offer by DSM-Firmenich (at that moment a newly incorporated subsidiary of DSM) to all DSM shareholders, in which one DSM share will be exchanged for one DSM-Firmenich share (1:1 ratio), (ii) contribution of Firmenich shares by the Firmenich shareholders in exchange for such number of DSM-Firmenich shares representing 34.5% of the total share capital of DSM-Firmenich, and (iii) listing of the DSM-Firmenich shares on Euronext Amsterdam.