USA – International Flavors & Fragrances (IFF) has signed a deal to sell its microbial control unit to German specialty chemicals maker Lanxess as part of the company’s portfolio optimization strategy.
According to a statement from the companies, the deal is valued at US$1.3 billion and is expected to close in the second quarter of 2022.
IFF, which produces flavors, fragrances, and cosmetic actives, said the cash proceeds from the deal will be primarily used to reduce outstanding debt.
Reuters reported last month that IFF had short-listed Lanxess and private equity-owned LSI in the sale of its microbial control unit as it sought to shake off some assets inherited from the DuPont deal.
The microbial control unit, a former Dow business that became part of DuPont following the two companies’ merger and subsequent split, makes biocides used in the oil and gas industry as well as for water treatment and hygiene purposes.
The microbial control unit of IFF is composed of about 270 employees with two production facilities in the U.S. and with an estimated 2021 annual revenue of about US$440 million, IFF said.
Earlier in May, IFF Chairman and CEO Andreas Fibig revealed during an earnings call that his company had reached an agreement to divest its food preparation business to Frulact.
On the call, Fibig said the business contributed about US$17 million to IFF’s segment sales in 2020, and this divestiture is the first step in the ingredient company’s portfolio optimization strategy.
The other unit said to be up for grabs is the company’s food preparation assets that could fetch about US$200 million to US$300 million, according to Bloomberg.
The food prep business, which manufactures fruit and other prepared ingredients for dairy and baked goods, had been previously divested by IFF and came back to its fold as part of its 2018 acquisition of Frutarom.
The divestitures are not just a strategy to streamline the new company, they are also handy sources of income for a company like IFF that wants to reduce its debt.
In its most recent earnings report, which covers the quarter ending Dec. 31, 2020, IFF had almost US$3.8 billion in long-term debt and nearly US$1.5 billion in non-current liabilities. The merger with the DuPont division added to that debt load.
Fibig said both at CAGNY and on the earnings call that debt repayment is the company’s top priority, and proceeds from divestments could help do that faster.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE
