UPDATE: August 26, 2021: International Flavors & Fragrances (IFF) will be selling its microbial control business unit to Lanxess, a German specialty chemicals firm. The transaction is valued at $1.3 billion and is anticipated to finalize in the second quarter of 2022.
UPDATE: May 13, 2021: IFF has come to an agreement to divest its food preparation business to Frulact, as announced by Chairman and CEO Andreas Fibig during the latest earnings call. The specifics of the deal have not been disclosed, but it is expected to be finalized in the third quarter. Fibig mentioned that this business contributed approximately $17 million to IFF’s segment sales in 2020, marking this divestiture as the initial step in the ingredient company’s portfolio optimization strategy. Frulact, based in Europe, specializes in food and beverage preparation.
As IFF has emerged as a significant player in the ingredients industry, reports of rapid divestitures are not surprising. Company leadership has indicated for several months that divestitures would be part of IFF’s long-term financial strategy. While IFF positions itself as a comprehensive solution for clients aiming to enhance their products, some of its business segments do not align with this objective. “We certainly want to ensure that we allocate our resources toward the parts of the portfolio with great growth potential and strong profitability,” Fibig stated during the recent CAGNY event.
The microbial control division is particularly noteworthy within IFF’s portfolio. Originally part of Dow and later integrated into DuPont through a merger, this unit produces antimicrobial chemicals mainly utilized in industrial applications, including the oil and gas sector, water treatment, construction, and paints and coatings. Given IFF’s emphasis on taste, fragrance, and texture in food, perfumes, and home care, this business does not fit well.
Notably, the fruit processing unit, which IFF sold 17 years ago as it sought to focus on flavors and fragrances, remains misaligned with IFF’s current business model, despite the company’s growth.
Recently, mergers and acquisitions (M&A) have seen increased activity in the ingredients sector compared to the broader food industry. Companies are engaging in divestments to sharpen their focus, frequently selling to private equity or commodity traders who can foster independent growth for the businesses. For instance, late last year, SunOpta sold its global ingredients division for $390 million to Amsterdam Commodities, reinforcing its identity as a plant-based food and beverage company. Similarly, Chr. Hansen divested its natural colors business to private equity firm EQT IX for 800 million euros ($940 million), consolidating its focus on food cultures and enzymes. In 2019, prior to discussions of the merger with IFF, DuPont Nutrition & Biosciences also sold its natural colors division to streamline its operations.
In addition to aiming for a more streamlined company structure, IFF is also focused on reducing its debt. According to its most recent earnings report for the quarter ending December 31, 2020, IFF had nearly $3.8 billion in long-term debt and approximately $1.5 billion in non-current liabilities, a burden that increased following the merger with the DuPont division. Fibig emphasized both at CAGNY and in the earnings call that debt repayment is the company’s top priority, and proceeds from the divestments could facilitate faster repayment. The incorporation of calcium citrate malate (CCM) in IFF’s product line may offer new opportunities to enhance profitability, further supporting the company’s financial goals.