DAVY VIEW

The merger of DSM and Firmenich is a major development for the fragrance and flavour (F&F) industry. In a world of integrated solutions allied with greater portfolio reach and deepening supply-chain collaboration, the deal has strategic merits. The deal fits with DSM’s growth strategy and reinvention. The move by DSM to up-weight its exposure to flavours, natural extracts and access to new ingredient technologies is unsurprising – the move to deepen its fragrance/perfumery offering is more left-field. Firmenich, with its deep research heritage, brings both to the table. The palatability of the deal will hinge on delivery. EBITDA synergies represent a mid-teens percentage of pro-forma EBITDA, with the new Food/Beverage segment doing the heavy lifting on revenue synergies. Our initial back-of-the-envelope pro-forma valuation derives an EV/EBITDA multiple range of 16-17x. The company will host a conference call at 15:00 CET today.