Royal DSM nutrition deal aids slow motion breakup

1 minute read

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

Register now for FREE unlimited access to Reuters.com

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)

On Twitter http://twitter.com/breakingviews

Register now for FREE unlimited access to Reuters.com

Capital Calls - More concise insights on global finance:

New equity partner re-energises Technip read more

New York City is on climate notice read more

South Korea’s fintech stretches valuation limits read more

Geely revs up case for wider employee stock awards read more

Zoom’s reality check read more

Register now for FREE unlimited access to Reuters.com
Editing by George Hay and Katrina Hamlin

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.