FRANKFURT (dpa-AFX) - European investors in the flavors and fragrance sector reacted negatively to DSM Firmenich's announced sale of its animal nutrition and health business. Shares of the Swiss-Dutch group plunged nearly six percent on Monday in Amsterdam. The company is selling a majority stake in the division to financial investor CVC for 2.2 billion euros. This move also had a negative effect on Symrise and Givaudan, whose shares dropped by up to one percent.
The intention to sell the division, which has been struggling with low-cost competition from China, was already known. "At first glance, it's unclear whether this is the catalyst investors have been waiting for," commented Citigroup analyst Sebastian Satz, expressing skepticism about the news. The exit is not as clear-cut as hoped, he wrote, noting that DSM is retaining a fifth of the business shares. The deal is also structured in a complex manner.
Other analysts questioned the valuation: Wim Hoste from Belgian financial group KBC wrote that he had actually estimated the division's total value at three billion euros. His colleague Chris Counihan from Jefferies pointed to emerging doubts, especially since the immediate cash proceeds amount to only 0.6 billion, with the remainder dependent on performance-based payments.
Alex Sloane from Barclays Research acknowledged the progress, highlighting that the sale process took two years—much longer than initially expected. However, he noted that DSM now needs to regain operational momentum for a re-rating. Sloane was also disappointed by the announced share buybacks, which at 0.5 billion euros are smaller than his previous estimate of one billion.
