Jefferies ups 'discounted' DSM to 'buy' ahead of Firmenich deal closure

Koninklijke DSM NV

14/09/2022 07:26

** Jefferies upgrades DSM  DSMN.AS  to "buy" from "hold",
citing low valuation of the Dutch specialty chemical company's
Nutrition business ahead of the closing of its merger with Swiss
Firmenich  urn:newsml:reuters.com:*:nL1N2XN07F
    ** The brokerage estimates that DSM's Nutrition business
currently trades at around 17% discount to key peers, making the
implied multiple for the Firmenich merger "more reasonable" at 
about 18x EV/EBITDA (pre synergies)
    ** Jefferies points out the Firmenich transaction structure
means the merger transaction multiple is directly linked to
DSM's share price performance
    ** Synergy targets for merger seem ambitious, the broker
says, adding however that even partial retention supports
organic growth for end markets and should offset shorter term
earnings risk in animal nutrition business
    ** Jefferies notes DSM has leverage to either pursue further
M&A or increase shareholder returns after merger completion,
expected in H1 2023
    ** It also underlines DSM's balanced portfolio which in the
long run will reduce impact of vitamin price volatility 
    ** Out of 22 analysts, 17 rate DSM "strong buy/buy", ​three
"hold" and two​ "strong sell/sell" 
    

 (Reporting by Olivier Sorgho)
 ((Olivier.Sorgho@thomsonreuters.com))