American multinational International Flavors & Fragrances (IFF) is set to acquire Israeli company Frutarom, one of the world’s 10 largest companies in the field of flavors and natural specialty fine ingredients, for over $7 billion, the companies announced on Monday. According to the terms of the agreement, the transaction will take place in cash and stocks.
The deal marks the second-largest transaction for an Israeli company after Intel acquired Jerusalem-based Mobileye, the world leader in advanced driver assistance systems aimed to prevent road collisions, for a record $15.3 million last year. It is also the largest purchase of 2018 so far, after Israeli electronic and industrial products manufacturer Orbotch was bought by California semiconductor equipment maker KLA-Tencor Corp for $3.4 billion.
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The agreement, “unanimously approved” by the boards of directors of both companies, will see Frutarom’s shareholders receive $71.19 in cash and 0.249 of a share of IFF common stock for each Frutarom share, represents a total value of $106.25 per share.
The companies said that the move “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.”
Frutarom President and CEO Ori Yehudai said in a statement, “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.”
Indeed, Frutarom has over the years been snapping up Israeli- and foreign-based companies and competitors to grow its offerings and potential. The latest transaction was in March when Frutarom acquired 70 percent of the Argentinian flavoring and fragrance group Meroar for $11.2 million. The previous month, it acquired IBR (Israeli Biotechnology Research), a developer of natural fine ingredients for the cosmetics and dietary supplements industries, for $21 million. And in one of its biggest deals in October 2017, it acquired Israeli-based biotech company Enzymotec, which develops and manufactures nutritional ingredients and medical foods, for about $210 million.
Frutarom’s annual sales in 2017 soared to over $1.5 billion, according to company records, and it is expecting sales of over $1.6 billion in 2018, and $2.25 billion by 2020.
Yehudai said in the IFF acquisition announcement that the agreement “marks the culmination of a decades-long vision to become a global leader in taste and health,” and will provide “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.”
He further said that both companies will maintain an Israeli presence.
In an interview with Israeli daily Globes, Yehudai said that no terminations were expected at Frutarom or any of its subsidiaries for at least the next three years, and that he expects to stay on in a senior position once the deal is finalized within the next 6 months.
Yehudai hailed the agreement as “very important for the Israeli economy.”
IFF Chairman and CEO Andreas Fibig said the transaction was “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.”
“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,” he added.
IFF already has a presence in Israel, having acquired Aromor Flavors and Fragrances Ltd in 2014 for an estimated $88 million.
Founded in 1933, Frutarom is based in Haifa and has with production and development centers on six continents. The company markets and sells over 70,000 products in over 150 countries, and is primarily focused on natural products, which drive more than 75 percent of its sales. The company “serves local and mid-size customers, and has a compelling presence in fast-growing adjacent and complementary categories such as natural colors, health and beauty ingredients, natural food protection and enzymes.”
Last month, Frutarom announced the launch of FoodNxt, an innovation lab for food tech startups in northern Israel.
The lab will focus on the development of all-natural ingredients for the food and beverage industry worldwide, and the startups chosen to join will be granted up to 85 percent of their approved R&D expenses (up to $300,0000) to reach proof of concept. Frutarom will meet with food tech startups at the FoodTech IL 2018 conference in Tel Aviv on May 7.