IFF to Combine With Frutarom to Create a Global Leader in Taste, Scent and Nutrition
Establishes an industry leader in naturals; broadens complementary customer base and expands differentiated product portfolio
$7.1 billiontransaction unlocks significant value creation opportunity; substantial cross-selling opportunities to accelerate long-term profitable growth
- Expected to realize approximately
$145 millionin run-rate cost synergies by the third full year
- Double-digit cash EPS accretive in second full year
- IFF expects to maintain its quarterly dividend consistent with prior guidance
- Frutarom shareholder representing 36% of shares outstanding has entered into an agreement to vote in favor of the transaction
- IFF and Frutarom to host conference call today at
8:00 am EST( 3:00 pmIDT) to discuss transaction and IFF’s first quarter 2018 financial results
By combining with Frutarom, IFF is accelerating its Vision 2020 strategy to create a global leader in taste, scent and nutrition. The combination 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.
“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.”
Mr. Fibig added, “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.”
Mr. Yehudai continued, “Today, we are extremely excited to combine Frutarom with IFF and together create global leadership in natural taste, scent and nutrition. The growth potential for the combined company is substantial and our shareholders will continue to enjoy this upside.
“Today marks the culmination of a decades-long vision to become a global leader in taste and health. This combination provides 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. Frutarom and IFF are committed to maintaining a presence in
“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
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. In addition, Frutarom mainly 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. Frutarom has a strong track record of growth, with expected sales of above
Compelling Strategic Rationale
- Establishes Industry Leadership in Naturals: The transaction creates a global leader in natural taste, scent and nutrition, as 75% of Frutarom’s sales are natural.
- Creates Differentiated Portfolio and Enhances Capabilities: 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. The combined company’s customers will have access to a comprehensive portfolio with more integrated solutions.
- Broadens Complementary and Growing Customer Base: Frutarom significantly enhances IFF’s exposure to the fast-growing small- and mid-sized customers, including private label. Approximately 70% of Frutarom’s sales are to these two customer groups.
Driving Enhanced Financial Performance
- Accelerates Profitable Growth: On a pro forma basis, the combined company would be expected to have approximately
$5.3 billionof revenue in 2018. Following the completion of the transaction, IFF is expected to benefit from enhanced top line growth rates and a strong EBITDA margin.
- Provides Significant Synergy Potential: IFF and Frutarom expect to realize approximately
$145 millionof 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, creating further value to shareholders over time.
- Drives Strong Earnings and Cash Flow Accretion: The transaction is expected to be neutral to adjusted cash earnings per share in the first full year and double-digit accretive to adjusted cash earnings per share in the second full year. The combined company is also expected to generate enhanced cash flow to meet operating, financing and strategic needs.
- Maintains Dividend: IFF expects to maintain its quarterly dividend consistent with prior guidance.
Management and Headquarters
Following the close of the transaction,
Additional Terms, Financing and Approvals
The purchase price represents a 13% premium to Frutarom’s 30-day VWAP for the period ended
Frutarom shareholders will also receive a special dividend, on a per share basis, equal to 0.249 of the per share value of IFF dividends with a record date after the date hereof and prior to the closing.
IFF intends to finance the cash portion of the transaction consideration through a combination of existing cash on hand, new debt raised and approximately
While IFF’s pro forma net debt to adjusted EBITDA ratio at the close of the transaction is expected to be approximately 3.7x, IFF is committed to maintaining an investment grade credit rating and will prioritize deleveraging through its anticipated strong cash flow generation. IFF expects to deleverage to 3.0x net debt to adjusted EBITDA or lower within 18-24 months after closing. To support this goal, IFF plans to suspend share repurchases until the target is met.
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
IFF First Quarter 2018 Earnings Results
In a separate press release issued today, IFF announced its First Quarter 2018 financial results. To access the earnings release, please visit here.
IFF and Frutarom will hold a conference call for analysts, investors and media representatives today at
Frutarom (LSE:FRUTq) (TASE:FRUT) is a leading global company operating in the global flavors and natural fine ingredients markets. Frutarom has significant production and development centers on six continents and markets and sells over 70,000 products to more than 30,000 customers in over 150 countries. Frutarom’s products are intended mainly for the food and beverages, flavor and fragrance extracts, pharmaceutical, nutraceutical, health food, functional food, food additives and cosmetics industries.
Cautionary Statement Regarding Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding IFF’s or Frutarom’s expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management and statements containing the words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “should,” “will,” “intend,” “may” and other similar expressions, are forward-looking statements. Statements in this communication concerning IFF’s or Frutarom’s business outlook or future economic performance, anticipated profitability, revenues, expenses or other financial items, and product or services line growth, together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting management’s best judgment based upon currently available information. Such forward-looking statements are inherently uncertain, and stockholders and other potential investors must recognize that actual results may differ materially from expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which IFF and Frutarom are unable to predict or control, that may cause IFF’s or Frutarom’s actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in IFF’s filings with the
Risks and uncertainties related to IFF’s proposed acquisition of Frutarom include, but are not limited to, the inability to obtain required regulatory approvals for the acquisition, the timing of obtaining such approvals and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the acquisition, the inability to obtain the requisite Frutarom shareholder approval of the transaction, the risk that a condition to closing of the acquisition may not be satisfied on a timely basis or at all, the failure of the proposed transaction to close for any other reason, uncertainties as to access to available financing (including financing for the acquisition or refinancing of IFF or Frutarom debt) on a timely basis and on reasonable terms, the impact of IFF’s proposed financing on its liquidity and flexibility to respond to other business opportunities, whether the acquisition will have the accretive effect on IFF’s earnings or cash flows that it expects, the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisition, costs and difficulties related to the integration of Frutarom’s businesses and operations with IFF businesses and operations, unexpected costs, liabilities, charges or expenses resulting from the acquisition, adverse effects on IFF’s stock price resulting from the acquisition, the inability to retain key personnel, and potential adverse reactions, changes to business relationships or competitive responses resulting from the acquisition.
In addition to the factors set forth above, other factors that may affect IFF’s plans, results or stock price are set forth in IFF’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Other factors that may affect Frutarom’s plans, results or stock price are set forth in Frutarom’s filings with the
Many of these factors are beyond IFF’s and Frutarom’s control and IFF and Frutarom caution investors that any forward-looking statements made by IFF or Frutarom are not guarantees of future performance. IFF and Frutarom disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
Important Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. IFF will file with the
International Flavors & Fragrances Inc.:
Michael DeVeau, 212-708-7164
VP, Corporate Strategy, Investor Relations & Communications
Roy Meltzer, +972-9-9603800
VP Business Development & Investor Relations