On Tuesday, BofA Securities adjusted its price target for International Flavors & Fragrances (NYSE:IFF), increasing it to $85.00 from the previous $83.00, while maintaining a Neutral rating on the stock. The revision follows IFF's recent announcement of an agreement to divest its Pharma Solutions business to Roquette for $2.85 billion. This deal is based on a 2023 EBITDA multiple of approximately 13 times, suggesting the divested earnings are around $220 million, slightly above the Pharma division's $199 million 2023 EBITDA. This valuation includes some additional assets beyond the Pharma Solutions business.
The sale is anticipated to be finalized in the first half of 2025. BofA Securities notes that IFF may continue to offload smaller, non-core assets. According to their calculations, IFF is on track to achieve its target of reducing net debt to less than three times its EBITDA by 2025. The estimated pro forma net leverage is projected to be 2.7 times.
The reassessment of IFF's financial outlook comes after the company announced a significant dividend reduction of about 50% in January. Post-dividend, IFF is expected to generate over $500 million in free cash flow on an annual basis. This financial position may lead to discussions about capital deployment in the coming year, which could potentially provide an upward push to the stock's performance.
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