Frutarom's expansion spree continues, takes 70 percent stake in Argentine companies
14 Mar 2018 --- Flavor and fragrance company Frutarom Industries Ltd. is continuing its roll of acquisitions with an agreement for the purchase of a 70 percent stake in Argentinian companies Meroar SA and Meroaromas SA for US$11.2 million. This marks the second acquisition so far this year, following 20 acquisitions in the past two years and 37 acquisitions carried out by the Israel-based company since 2013.
The purchase agreement includes an option to purchase the balance of Meroar's shares, starting from the elapse of three years of completion of the transaction, at a price based on Meroar's business performance during this period.
The transaction – which is expected to be completed over the coming months and financed through bank debt – is also expected to deepen the company’s penetration into Latin America in the flavors and fragrance arena and marks Frutarom’s first significant entry into the Argentinian market.
Meroar's sales turnover in 2017 totaled approximately US$7.4 million while exhibiting higher profitability rates than those of Frutarom's Flavors division, which it will be integrated with.
Frutarom projects an accelerated growth in Meroar’s activity, supported by the many cross-selling opportunities generated by this acquisition, based on Frutarom's leading position in Latin American markets, and the broad range of technologies and solutions it has in these markets, as well as Meroar's leading position in Argentina.
Established in 1980, Meroar researches, develops, manufactures and markets flavors and fragrances. The group has a workforce of 40 employees and a manufacturing site in the capital Buenos Aires with R&D and application labs and separate production facilities for flavors and fragrances.
Meroar has a broad portfolio of solutions, which includes fragrances for the cosmetics, personal care and household products industries, and flavors mainly for the beverage, sweets, baked goods and pharmaceutical industries. It also has a broad customer base in Argentina which includes leading cosmetics and food companies.
“Meroar has extensive know-how acquired over the years and unique flavors and fragrance solutions based on its founders' extensive experience. Those will contribute to building up our position in these activities, with an emphasis on Latin America, in combination with our activity in the fragrance industry in Peru, through Montana, which will enable some very interesting synergies and cross-selling opportunities, in Argentina, Peru, and other Latin American countries.”
“In addition, Frutarom's leading position in the field of flavor solutions in Latin America will enable us to significantly enhance Meroar's flavor solution's activity, while capitalizing on the significant cross-selling potential, by offering a broad range of Frutarom products and technologies to Meroar's customers in Argentina, a country where our presence so far has not been substantial and we see a rapid growth horizon for Frutarom there.”
Frutarom’s acquisitions & deepening market share in Latin America
In 2017, Frutarom acquired the Israeli company Turpaz, with development centers in the US and the south of France, as well as the Polish company Pollena Aroma, which has a modern facility that will serve as the European center for Frutarom's growing fragrances activity, which were added to Frutarom’s minor existing fragrance business concentrated mainly in India, Africa and Latin America.
Frutarom intends to continue to expand its activity in fragrances through the accelerated development of a global platform of knowledge and expertise, along with additional future acquisitions of small and medium-sized fragrances companies.
The Meroar acquisition is also part of Frutarom's plan to deepen its market share in the growing market of Latin America.
• In 2016 Frutarom acquired the Brazilian company Nardi Aromas, specializing in the production of natural flavors and extracts for the Brazilian beverage market and Piasa, a Mexican leading local player in the field of Savory Solutions.
Also, in recent years Frutarom has taken action to expand its activity in Latin America based on its production infrastructure and global and local R&D and marketing capabilities while tapping into the synergies generated by its acquisitions.
The company has growing activity in most of the region's countries and it intends to continue to expand its activity in Argentina, South America’s second largest country, and in other Latin American countries.
Argentina an attractive market in Latin America
According to Frutarom, Argentina is an attractive market because of its political transformation and positive macro-economic changes, characterized by structural reforms in taxation, the labor market and budgetary policy, which have led to a 3 percent growth in its GDP in 2017, a growth which is projected to continue in 2018.
Meroar's managers and founders, Mario Volevici, Jorge Safi, Juan Carlos Indeciso and Emiliano Volevici, will continue managing the activity and will become part of Frutarom's management structure in Latin America. They will also remain on as shareholders with 30 percent of the Meroar Group's capital equity.
Outlook
Frutarom CEO Yehudai notes how the Meroar acquisition continues Frutarom’s implementation of its rapid and profitable growth strategy and objective “to be the preferred partner for tasty and healthy success.”
“This is our second acquisition this year, following 20 acquisitions in the past two years, and 37 acquisitions we have carried out since 2013, which have been successfully integrated into our global activity and have contributed, and will continue to contribute, to further growth in sales and improved profits and margins through maximum capitalization on the synergies they bring,” he continues.
“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 and profitable growth strategy, which is based on combining profitable internal growth and strategic acquisitions, in order to achieve our recently revised targets of at least US$2.25bn in sales with an EBITDA margin of 23 percent in our core activities by the year 2020.”
FoodIngredientsFirst has reached out to Frutarom for more information about this latest acquisition as well as business plans.
To contact our editorial team please email us at editorial@cnsmedia.com
Subscribe now to receive the latest news directly into your inbox.