Frutarom is continuing its momentum of acquisitions with an eighth purchase this year, by acquiring 60 percent of the shares of the Thai flavors company The Mighty CO. LTD. (including the activity of Maharaj Food Co. Ltd. and Mighty International Co. Ltd.) for approximately THB 393 million (approx. US$12 million) and at a valuation of THB 655 million (approx. US$20 million).
The first part of the transaction will be completed in the upcoming weeks and Frutarom estimates that raising its holdings to 60 percent will be completed within several months. The acquisition will be financed by independent means and through bank debt.
In the framework of the transaction, Frutarom will initially acquire 49 percent of Mighty and, subject to a number of conditions precedent and regulatory approvals in Thailand, will raise its holdings to 60 percent. The transaction includes a mechanism for future consideration subject to Mighty’s future performance and an option for the purchase of the balance of holdings in Mighty in two stages in periods beginning three years and five years from the date the transaction is completed.
Mighty’s sales turnover in the 12 months ended August 2017 totaled approx. THB 500 million (approx. US$ 15 million) after having registered average annual growth of 12 percent over the past four years. The company has a leading position in Thailand’s flavors market where there are very few producers of taste solutions and is among the most innovative flavors companies in Southeast Asia based on independent R&D.
The company’s broad portfolio of solutions includes flavors, seasoning blends and marinades as well as specialty functional raw materials for the food and beverage industry with emphasis on the field of convenience foods, snacks, noodles, fish, meats, baked goods, beverages and dairy, and it has a portfolio of unique products and solutions adapted to Asian tastes based on the vast knowledge and experience of its managers. Mighty’s activity also includes unique solutions for producing raw materials for the fields of infant nutrition and elderly nutrition, and Frutarom intends to continue developing this activity in Thailand and in the countries of the region.
Mighty’s activity also blends in with Frutarom’s expanding global savory activity which has grown significantly in recent years. Frutarom sees the great strategic importance for rapid growth in the field of savory flavors in which now holds a leading market position. The global market for savory flavors is growing due to the rise in the standard of living and changes in lifestyle and consumer habits bringing about increased demand for processed and convenience foods both for home consumption and for eating out.
Ori Yehudai, President and CEO of Frutarom Group, says: “The acquisition of the Thai flavors company Mighty is an additional acquisition of activity in Frutarom’s core field which strengthens our global market leadership in the field of savory along with deepening our activity in the important growing region of Southeast Asia and continues Frutarom’s implementation of its rapid and profitable growth strategy and realization of its vision ‘to be the preferred partner for tasty and healthy success.”
“The acquisition will contribute towards strengthening our position in Thailand while attaining a significant comparative advantage of proven innovative R&D capabilities and an advanced local sales and production center in one of Southeast Asia’s most important and fastest growing markets,” says Yehudai. “We continue to view Southeast Asia as an important region in our map of future growth and are examining further transactions in the region that will allow accelerated growth in our core activities.”
In conclusion, Yehudai says: “The Mighty acquisition is our eighth acquisition this year, following 27 acquisitions we have made since 2015 which has been successfully integrated into our global activity and have been and will continue contributing to further growth in sales and improved profits and margins through maximal capitalization on the synergies they bring. We have an outstanding pipeline of further strategic acquisitions of companies and activities within the scope of our operations and we will continue carrying out our rapid profitable growth strategy, which is based on combining profitable internal growth and strategic acquisitions, in order to achieve the targets we set: sales of at least US$2 billion with an EBITDA margin of over 22 percent in our core activities by the year 2020.
Source: Food Ingredients First