International Flavors & Fragrances To Shell Out $7.1 Billion To Acquire Frutarom

International Flavors & Fragrances has reached an agreement to acquire Frutarom, a maker of ingredients and flavors based in Israel at a price of $7.1 billion. The transaction will involve both cash and stock.

After Givaudan, a Geneva, Switzerland-based firm indicated that it was interested in acquiring Naturex, a natural ingredients company based in France, the fragrances and flavors industry was expected to witness a series of consolidation moves. Last month it had also been reported by Israeli media that there was takeover interest from Frutarom.

The takeover of Frutarom has received the approval of the two companies’ board. If successful this will be the second biggest of a company based in Israel behind the acquisition of Mobileye at a price of $15 billion by Intel.

Shareholder value

“This transaction is a big win and a fantastic outcome for shareholders, customers and employees of both companies. Frutarom has an extremely attractive product portfolio, including broad expertise in naturals and diverse adjacencies with capabilities beyond our core taste and scent businesses,” the chairman and chief executive officer of IFF, Andreas Fibig, said.

According to IFF the acquisition will bring together two companies which possess complementary customers, geographic reach and capabilities and this will give enhanced exposure in fast-growing end markets.

The deal terms will see shareholders of Frutarom get a premium of 11% based on the May 6 close of the share price. Frutarom’s net debt will also be assumed by IFF. In 2018 the two firms are expected to generate combined revenues amounting to $5.3 billion.

Voting agreement

The biggest shareholder of Frutarom, ICC Industries, has reached a voting deal with IFF and consequently will offer its support when shareholders meet to vote. Currently ICC Industries has a 36% interest in Frutarom. The second biggest shareholder in Frutarom is Fidelity Management and Research with a stake of 8.9%.

Frutarom has a portfolio of over 70,000 products and this includes enzymes, natural food protection, beauty and health ingredients and natural colors which is sells to mostly mid-sized firms in 150 countries. Some of its biggest customers include multinationals such as Coca-Cola, Nestle and Unilever.

Three years after closing the deal the two firms expect to realize cost savings amounting to $145 million. About 25% of the cost savings will be attained one full year after the deal is closed. Subject to customary closing conditions and various approvals the deal is expected to close in 6 to 9 months.