Royal DSM nutrition deal aids slow motion breakup

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Angelo Simeone, the owner of a family-run dairy farm in the southern Italian town of Fasano, is seen during the lockdown to stop the spread of the coronavirus disease (COVID-19), in Fasano, Italy April 8, 2020. REUTERS/Alessandro Garofalo

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LONDON, Sept 3 (Reuters Breakingviews) - Dutch Royal DSM(DSMN.AS) is slow-cooking a transformation. The 30 billion euro chemicals company is buying First Choice Ingredients, valuing the dairy-based savoury flavourings business at $453 million, including debt. That’s almost 20 times an estimated adjusted 2021 EBITDA, in line with peer Corbion (CORB.AS). The U.S. company flogs enzymes and cultures-based flavourings – an idea likely to be popular with proponents of “clean” food.

It also helps DSM’s efforts to focus on nutrition while slowly cutting materials, which contributed around a fifth of net sales in the first half, from its diet. Last year the company sold its resins and functional materials businesses to Covestro (1COV.DE) for 1.6 billion euros. This makes sense. Stuff like thermoplastics has limited synergies with perishables. Industry leader Givaudan (GIVN.S) trades at almost 30 times forward EBITDA compared to DSM’s 17 times, according to Refinitiv. Finalising its breakup could boost DSM’s valuation. (By Dasha Afanasieva)

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Editing by George Hay and Katrina Hamlin

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