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International Flavors (IFF) to Divest Microbial Control Business

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International Flavors & Fragrances Inc. (IFF - Free Report) has entered into an agreement to divest its Microbial Control business unit to LANXESS for $1.3 billion. Cash proceeds of the deal will be utilized in reducing debt.

LANXESS is a foremost specialty chemicals company that develops, manufactures and markets chemical intermediates, additives, specialty chemicals and plastics.

The latest deal enables International Flavors to focus on its core business operations by strengthening the balance sheet, while maximizing shareholder return. In fact, the divesture boosts its financial position by providing growth acceleration and higher margins. The deal is expected to close in the second quarter of 2022.

International Flavors’ Microbial Control business unit offers preservation and hygiene solutions for a broad range of industrial and consumer applications that includes paints & coatings, building materials, animal biosecurity, personal care, and home care. It also provides industrial water treatment solutions for production, cooling towers and pulp & paper. With two production facilities in the United States, this business has an estimated revenue of $440 million for the current year and an EBITDA of around $85 million.

Microbial Control joined with International Flavors through the merger deal with DuPont de Nemours, Inc.’s (DD - Free Report) Nutrition & Biosciences ("N&B") business. Earlier this year, International Flavors officially completed its merger with DuPont’s N&B business. The new entity is anticipated to be a global leader in high-value ingredients and solutions for food and beverage, home and personal care, and health & wellness markets with estimated pro forma revenues of more than $11 billion and EBITDA of $2.5 billion.

In May, International Flavors entered into an agreement to divest its fruit preparation business to Frulact, in sync with the company’s portfolio-optimization strategy to maximize shareholder value through non-core business divestitures. The divestiture is expected to close in third-quarter 2021.

The company expects current-year sales to be $11.4 billion, indicating year-over-year growth of 7%. Focus to drive greater efficiencies throughout the business through costs and productivity initiatives, margin improvement, acquisition-related synergies and favorable taxes continues to drive profitability. The company is prioritizing projects that generate high returns within a short time, while delaying longer-term investment that are unnecessary at this time.

International Flavors is well poised to benefit from the increasing demand for a variety of consumer products containing flavors and fragrances. Given the company’s global presence, diversified business platform, broad product portfolio, global and regional customer base, it will be able to capitalize on the expansion in the flavors and fragrances markets, and deliver long-term growth.

Price Performance

Over the past year, International Flavors’ shares have gained 39.5%, outperforming the industry’s growth of 3.9%.

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Zacks Rank & Key Picks

International Flavors currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Consumer Staples sector are Inter Parfums, Inc. (IPAR - Free Report) and Pilgrim's Pride Corporation (PPC - Free Report) . While Inter Parfums flaunts a Zacks Rank #1 (Strong Buy), Pilgrim's Pride carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inter Parfums has an expected earnings growth rate of 61.2% for 2021. The stock has gained 23.6% in the past year.

Pilgrim's Pride has a projected earnings growth rate of 114.7% for the current year. Its shares have rallied 38.6% in a year’s time.