Shares of DSM-Firmenich fell by over 5% on Monday following the company's confirmation that it will divest its Animal Nutrition & Health (ANH) arm. The move - long anticipated by the market - disappointed some investors who viewed the package of proceeds and capital return measures as smaller than expected and left doubts about growth momentum in the firm's core consumer-facing activities.
Under the terms announced, private equity firm CVC will acquire ANH for an enterprise value of €2.2 billion. DSM-Firmenich will retain a 20% stake in the business and institute a €500 million share buyback program. The company said the deal implies a valuation of roughly 7 times normalised EBITDA.
Management expects to receive approximately €1.2 billion at closing, a figure that includes cash proceeds and the debt that will transfer with the business. At the same time, DSM-Firmenich said it will record a €1.9 billion non-cash impairment in 2025 related to the transaction.
Analyst reaction
Barclays analysts described the agreement as providing "long-needed closure" to what they called a complex separation process. However, they cautioned that the buyback size - seen as smaller than many investors hoped - could weigh on sentiment in the near term.
The brokerage highlighted that the relatively modest buyback quantum reflects the fact that debt associated with ANH is leaving the group along with the business. Barclays also warned that earnings-per-share dilution may take longer to reverse than investors had anticipated.
Looking ahead, the analysts said the company's ability to achieve a meaningful re-rating will depend on tangible improvements in the underlying operating performance. They signalled that the priority now shifts to restoring OSG momentum and moving margins toward the targets laid out at the company's 2024 capital markets day.
Near-term outlook and market impact
Barclays added that forthcoming quarterly results were likely to show only modest growth - an outcome it said would be "unlikely to excite the market" and which helps explain the sharp sell-off in the stock. The combination of a smaller buyback, retained minority ownership of ANH, the upcoming impairment charge and the expectation of only modest near-term growth created investor nervousness that translated into downward pressure on the share price.
While the divestment narrows the group's scope and refocuses management on consumer nutrition, health and beauty, analysts stressed that a sustained uplift in valuation will require improved operational execution rather than the transaction alone.