IFF enters a definitive agreement to acquire Frutarom for US$7.1bn

USA – International Flavors & Fragrances Inc. has announced that they have entered into a definitive agreement under which IFF will acquire Frutarom in a cash and stock transaction valued at approximately US$7.1 billion, including the assumption of Frutarom’s net debt.

Frutarom makes natural colors, food ingredients, enzymes for customers including Unilever, Nestle and Coca Cola as well as Israeli food-maker Osem and has a market value of US$5.7 billion.

According to the company, the terms of the agreement, which had been unanimously approved by the Boards of Directors of both companies, Frutarom’s shareholders will receive for each Frutarom share US$71.19 in cash and 0.249 of a share of IFF common stock.

These shares, based on the 10-day volume weighted average price (VWAP) for IFF’s common stock for the period ending May 4, 2018, represents a total value of US$106.25 per share.

By combining with Frutarom, IFF is accelerating its Vision 2020 strategy to create a global leader in taste, scent and nutrition.

The combination unites two industry-leading, innovative companies with complementary customers, capabilities and geographic reach, resulting in more exposure to fast growing end markets and an enhanced platform to deliver sustainable, profitable growth.

The combined company’s customers will have access to comprehensive and differentiated integrated solutions with increased focus on naturals and health and wellness.

“This transaction is a big win and a fantastic outcome for shareholders, customers and employees of both companies,” said IFF Chairman and CEO, Andreas Fibig.

“Frutarom has an extremely attractive product portfolio, including broad expertise in naturals and diverse adjacencies with capabilities beyond our core taste and scent businesses.

It also has significant exposure to complementary and fast-growing small- and mid-sized customers.

By combining our deep R&D expertise with Frutarom’s, we are offering our customers a broader range of solutions and accelerating our growth strategy.

We believe this combination will lead to faster and more profitable growth, enhanced free cash flow and generate greater returns for our shareholders.”

Frutarom has a strong track record of growth, with expected sales of above US$1.6 billion in 2018, and have a previously announced target of US$2.25 billion in sales by 2020.

Mr. Fibig added, “We have long admired Frutarom and have a great deal of respect for its team and all of its dedicated and talented employees around the globe.

We look forward to welcoming Frutarom to the IFF family.”

Ori Yehudai, President and CEO of Frutarom said, “Frutarom has had a fascinating journey of accelerated growth, far above our industry benchmarks through our investment in unique technologies and focus on natural products in the growing world of health and taste.”

“Today, we are extremely excited to combine Frutarom with IFF and together create global leadership in natural taste, scent and nutrition.

The growth potential for the combined company is substantial and our shareholders will continue to enjoy this upside.”

“Today marks the culmination of a decades-long vision to become a global leader in taste and health.

This combination provides great opportunities for both our dedicated employees and highly valued customers who will enjoy our combined technologies and global reach while maximizing value for our shareholders.

Frutarom and IFF are committed to maintaining a presence in Israel, and I look forward to working with Andreas and the team to ensure a seamless integration of these two terrific companies.

I would like to personally thank Dr. John Farber, our Chairman, for his vision and tireless support together with the contribution of our devoted excellent employees in the transformation of Frutarom from a small, local company to a global leader in the fields of taste and health.”

“This transaction represents a major milestone for Frutarom and opens the door to a new chapter of growth and shareholder value creation,” said John Farber, Frutarom Chairman of the Board and Chairman of ICC Industries Inc., Frutarom’s largest shareholder.

“I am pleased to support this historic combination of two world-class companies and look forward to the next chapter of the IFF and Frutarom story.”

According to Reuters, the deal between the two will be the second largest of an Israeli company, behind Intel’s US$15 billion purchase of Mobileye.

Advances in the flavors and fragrances in competition for a market size valued at US$18.6 billion in 2015 have seen bids for acquisition in the industry dominated by Givaudan, Firmenich, Symrise, IFF, Frutarom, Takasago among many.

In March, Givaudan offered to acquire 40.6% stake in the French natural ingredients firm Naturex for 522 million euros.

According to estimates by Thomson Reuters, Givaudan was expected to post revenues of more than US$4.76 billion in estimates and in terms of sales, IFF is at US$3.69 billion, close to Germany’s Symrise US$3.21bn while Firmenich of Switzerland may be too way below in 2018.

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