International Flavors & Fragrances Inc. makes their largest acquisition in the company’s history agreeing to buy Israel’s Frutarom Industries Ltd. for $7.1 billion including debt. According to Bloomberg the purchase will make IFF the industry’s No. 2 player, displacing Firmenich International SA and trailing Givaudan SA.

WHO: Frutarom is a flavors, savory solutions, and natural ingredients company, with production and development centers on six continents. It markets and sells over 70,000 products to more than 30,000 customers in over 150 countries. Frutarom is primarily focused on natural products, which drive more than 75% of its sales. Frutarom’s product portfolio consists of innovative and integrated solutions combining taste and health, natural and clean label products.

International Flavors & Fragrances is a leading innovator of sensorial experiences that move the world. A passion for exploration drives them to co-create unique products that consumers taste, smell, or feel in fine fragrances and beauty, detergents and household goods, as well as beloved foods and beverages. Their 7,300 team members globally take advantage of leading consumer insights, research and development, creative expertise, and customer intimacy to develop differentiated offerings for consumer products.

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

IN THEIR OWN WORDS: “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.”

“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.”

DETAILS:

• IFF will acquire Frutarom in a cash and stock transaction valued at approximately $7.1 billion, including the assumption of Frutarom’s net debt.
• Frutarom has a strong track record of growth, with expected sales of above $1.6 billion in 2018, and their previously announced target of $2.25 billion in sales by 2020.
• The deal values Frutarom at 20.3 times its expected 2018 earnings before interest, taxes, depreciation, and amortization.
• The transaction creates a global leader in natural taste, scent, and nutrition, as 75% of Frutarom’s sales are natural.
• In addition to IFF’s and Frutarom’s highly complementary flavor capabilities, Frutarom’s portfolio creates opportunities to expand into attractive and fast-growing categories, such as natural colors, enzymes, antioxidants, and health ingredients.
• Frutarom significantly enhances IFF’s exposure to fast-growing small- and mid-sized customers, including private label. Approximately 70% of Frutarom’s sales are to these two customer groups.
• IFF intends to finance the cash portion of the transaction consideration through a combination of existing cash on hand, new debt raised, and approximately $2.2 billion in new equity. IFF has secured committed bridge financing from Morgan Stanley Senior Funding Inc.
• The transaction is expected to close in six to nine months and is subject to approval by Frutarom shareholders, clearance by the relevant regulatory authorities, and other customary closing conditions.