IFF to acquire Frutarom $7.1 billion

The deal establishes IFF as an industry leader in the clean label space 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.

The combined company’s customers will have access to comprehensive and differentiated integrated solutions with increased focus on naturals and health and wellness. The transaction, which has been approved by both companies’ boards of directors, also enhances IFF’s exposure to the fast-growing small- and mid-sized customers, including private label, which account for approximately 70% of Frutarom’s sales.

Frutarom operates through two divisions. Its Flavors Division, which makes up two-thirds of the company’s sales volume, develops, produces and markets flavors, savory solutions, seasonings and food systems. The Fine Ingredients Division develops, produces and markets natural flavor extracts, functional food ingredients, natural pharmaceutical/ nutraceutical extracts, specialty essential oils, citrus products and aroma chemicals.

“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. 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.”

Commenting on the deal, Ori Yehudai, president and CEO of Frutarom, said: “Frutarom has had a fascinating journey of accelerated growth, far above our industry benchmarks through our investment in unique technologies and focus on natural products in the growing world of health and taste. 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.”

The announcement comes just a few months after Givaudan said it would acquire Naturex, a manufacturer and marketer of plant-based specialty ingredients for the food, health and cosmetic industries US$1.6 billion. The acquisition will strengthen Givaudan’s foothold in the growing natural flavors sector and move it into a leading position in natural extracts and ingredients market, which is predicted to grow as consumers make the shift from synthetic food ingredients to natural, clean label alternatives.

Upon completion of the deal, Yehudai will serve as a strategic adviser supporting Fibig. IFF will remain headquartered in New York City and maintain a presence in Israel.