New York-based flavors and fragrances giant IFF is to acquire Israeli flavors and natural ingredients firm Frutarom in a $7.1bn deal that will propel it into the #2 spot in the global flavors market behind Givaudan.
The move – which will create a company with combined revenues of $5.3bn in 2018 – comes a month after Givaudan unveiled plans to buy French natural ingredients group Naturex.
“Frutarom has an extremely attractive product portfolio, including broad expertise in naturals and diverse adjacencies with capabilities beyond our core taste and scent businesses,” said IFF chairman and CEO Andreas Fibig.
“It also has significant exposure to complementary and fast-growing small- and mid-sized customers [accounting for around 70% of sales]. 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.”
A flavors, savory solutions and natural ingredients company, Frutarom also has a presence in natural colors, health and beauty ingredients, natural food protection and enzymes, with expected sales of more than $1.6bn in 2018, and $2.25bn by 2020.
It has production and development centers on six continents, and markets and sells products in 150+ countries, with natural products driving more than 75% of its sales. Synergies are expected to come from procurement, footprint optimization and streamlining overhead expenses, coupled with cross-selling opportunities and integrated offerings.
Following the close of the transaction, expected in six to nine months, Frutarom president and CEO Ori Yehudai will serve as a strategic advisor supporting Fibig at IFF, which will keep its headquarters in New York City, but will maintain a presence in Israel.
Frutarom works with small and mid-size companies
Speaking to FoodNavigator-USA last year, Yehudai said he was on a mission to make natural products more affordable: “If you ask manufacturers – would you buy this [natural color/flavor/preservative] if it cost 25% more – as opposed to 100% or 200% more, they say ‘Yes!’ so we are working with growers of annatto, rosemary and other products to bring costs down.”
Unlike the world’s biggest flavor companies, many of whom only deal with large manufacturers and lack Frutarom’s flexibility, Frutarom also works with small and mid-size companies that are growing much more rapidly than most CPG giants, said Yehudai, who has also been targeting fast-growing players in the private label market.
As for the secret to successful M&A – Frutarom has acquired over 30 companies in the past five years – it’s about building partnerships, he said.
“Most acquisitions fail because acquirers don’t retain the key people, they lose customers, they lose morale and they lose focus. We want the business owners to be our partners and we incentivize them to stay and build the business with us.”
Source: Food Navigator