Kerry Group has lost out in a race to acquire the nutrition division of DuPont, the US conglomerate. On Sunday, DuPont announced that it had struck a $26bn (€23.5bn) deal with International Flavors & Fragrances (IFF), a New York-based company.

The deal will create a $45bn (€40bn) company, twice the size of Kerry Group and the largest flavour company in the world. Under the terms of the agreement, DuPont will spin out its nutrition division to merge with IFF using a Reverse Morris Trust structure, which will allow DuPont’s shareholders to avoid paying tax on the deal.

DuPont shareholders will own 55.4% of the new combined company, while existing IFF shareholders will own the remainder. IFF will also make a once-off $7.3bn (€6.5bn) cash payment to DuPont.

DuPont’s announcement that it has opted to merge with IFF ahead of Kerry Group will come as a blow to Kerry CEO Edmond Scanlon and his senior management team. Behind the scenes, Kerry Group has put a lot of effort into this potential deal with DuPont, which would have been transformative for the company.

While Kerry has been working on this potential takeover for months, IFF only entered the frame in the last week and has now pipped Kerry Group to one of the largest deals of the year. Last year, IFF struck a deal to acquire Frutarom Industries, another Kerry competitor, for $7.1bn (€6.4bn).

Shares in Kerry Group fell 4% on Monday after the news broke but have steadily recovered since.