International Flavors & Fragrances (IFF) and Frutarom today announced that they have entered into a definitive agreement for IFF to acquire Frutarom in a cash and stock transaction valued at approximately $7.1 billion, including the assumption of Frutarom’s net debt.
IFF is paying an 11% premium to Frutarom’s 6 May close. The combined company will have pro forma 2018 revenue of approximately $5.3 billion.
Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Frutarom’s shareholders will receive for each Frutarom share $71.19 in cash and 0.249 of a share of IFF common stock, which, based on the 10-day volume weighted average price for IFF’s common stock for the period ending 4 May 2018, represents a total value of $106.25 per share.
IFF intends to finance the cash portion of the transaction 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.
IFF has entered into a voting agreement with affiliates of ICC Industries Inc., which hold in total approximately 36% of Frutarom’s outstanding shares, under which they will vote their Frutarom shares in favor of the transaction.
The combination unites two industry-leading companies with complementary customers, capabilities and geographic reach, resulting in more exposure to fast growing end markets. IFF and Frutarom expect to realize approximately $145 million of run-rate cost synergies by the third full year after closing, with approximately 25% achieved in the first full year. Synergies are expected to come from procurement, footprint optimization and streamlining overhead expenses. In addition, cross-selling opportunities and integrated solutions are expected to provide revenue synergies.
Frutarom is a flavors, savory solutions and natural ingredients company. It is primarily focused on natural products, which drive more than 75% of its sales. It has a presence in fast-growing adjacent and complementary categories such as natural colors, health and beauty ingredients, natural food protection and enzymes. Frutarom has a strong track record of growth, with expected sales of above $1.6 billion in 2018, and its previously announced target of $2.25 billion in sales by 2020.
“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,” says Andreas Fibig, IFF chairman and CEO. The combined company’s customers will have access to integrated solutions with increased focus on naturals and health and wellness, he says. Ori Yehudai, president and CEO of Frutarom says he sees substantial growth potential for the combined company. Following the close of the transaction, Yehudai will serve as a strategic advisor. IFF will remain headquartered in New York City and will maintain a presence in Israel. IFF’s stock at closing will be listed on the New York Stock Exchange and the Tel Aviv Stock Exchange.
By Natasha Alperowicz
Source: Chemical Week
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