(Bloomberg) -- International Flavors & Fragrances Inc. has emerged as a strong contender to purchase DuPont Inc.’s nutrition division, challenging Ireland’s Kerry Group for the $25 billion asset, according to people with knowledge of the matter.

IFF and Kerry are both negotiating with DuPont and the winner could reach a deal by year-end, the people said, asking not to be identified as the discussions are private. The transaction will create a new company comprised of the bidder’s assets and DuPont’s nutrition business that will be spun off to existing investors, the people said.

DuPont shareholders will emerge from the so-called Reverse Morris Trust with a significant stake in the business, the people said. The new company aims to have an investment-grade credit rating and its board will include directors from DuPont and the bidder, the people said. The transaction is likely to take at least a year to close, they said.

Representatives for DuPont and IFF declined to comment. A representative for Kerry didn’t respond to a request for comment after regular business hours. Discussions between the companies are continuing and the deal may still fall apart, the people said.

DuPont, under Chairman Ed Breen and Chief Executive Officer Marc Doyle, opted for the most tax-efficient option to reward shareholders after the value of its nutrition business had wallowed below industry levels as part of a diversified company.

The deal would be the biggest ever for IFF, which makes flavors and fragrances for food, beverages, personal care and household products. The company’s last big acquisition was in the food-flavoring industry last year, when it bought Israel’s Frutarom Industries Ltd. for $7.1 billion including debt.

Based in Ireland, Kerry has long wanted to expand in healthy bacteria strains, ingredients found in dietary supplements, cheese and bakery products, and nutritional products that claim to have some sort of role in assisting in disease treatment or prevention.

--With assistance from Kiel Porter and Andrew Noël.

To contact the reporters on this story: Nabila Ahmed in New York at nahmed54@bloomberg.net;Ed Hammond in New York at ehammond12@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Kevin Miller

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