Symrise swoops for ADF/IDF in US$900m deal, boosts pet food and US position

01 Feb 2019 --- Symrise has signed a purchase agreement with the owners of ADF/IDF, a leading natural nutrition ingredient provider for pet food, to acquire their business. The purchase price amounting to US$900 million will be financed by debt and equity. The combination of ADF/IDF and the Symrise Nutrition division Diana will create a leading global player in meat and egg-based protein specialties with focus on all natural and sustainable solutions.

US-headquartered ADF/IDF is a pioneer in clean label meat and egg-based taste and nutrition ingredients. With the move, Symrise aims to broaden its activities in the fast growing pet food business and to expand its position in the attractive food nutrition market. The acquisition is expected to be fully EPS accreditive from the first year after closing. With its approximately 470 employees, ADF/IDF generated sales of US$220 million and an EBITDA margin of 23 percent. The transaction is subject to satisfaction of customary closing conditions.

Symrise made a first foray into pet food ingredients with the acquisition of France’s Diana Group for US$1.8 billion in 2014. Since then, there have been several major acquisitions by fellow flavor behemoths, most notably Givaudan acquiring Naturex and IFF buying Frutarom during a healthy 2018. This latest news suggests further consolidation during 2019, as major flavor players look beyond their base to target the more holistic concept of taste.

The move brings expertise in nutrition to complement existing palatability knowledge. “This is the extension of the Diana buy and goes absolutely in the same field in terms of strategic rationale,” Bernhard Kott, Head of Corporate Communications at Symrise tells FoodIngredientsFirst. “It is absolutely complementary to our Diana activities, especially as pet food is concerned, but also in food ingredients. In pet food, Diana is the leader in palatability and ADF/IDF is more focused on nutritional aspects coming from meat and egg-based proteins. We can now extend our value chain and to offer more comprehensive product solutions, especially in pet food.” 

There are clear R&D advantages in combining the two portfolios. “The R&D capabilities means backward integration in raw material streams of white meat and egg, which we are using for our proteins. Both capabilities in palatability and nutrition will end up in products for pet food, but also human food,” says Kott.

Little change can be expected at ADF/IDF as it is integrated into the portfolio. “This deal is complementary and is not a synergy deal. We are looking for cross-selling opportunities but are not after synergies,” he explains.

Kott explains that the market dynamic towards naturalness has driven much of the consolidation in ingredients in recent years, with Symrise setting the tone. “What we do for many years is try to shift all our material base, especially in flavors, but also in other areas such as cosmetic ingredients, towards natural resources,” says Kott. “Many years ago, half of the flavorings were synthetic and the other half were natural. There is a strong shift, particularly in the health conscious North American market, towards natural solutions. We want to understand that when we buy some raw materials, whether it is meat, vegetables or fruit, where the products are coming from, where they are grown and that they are fully traceable. It is important that we control the supply chain,” he explains.

ADF/IDF (American Dehydrated Foods/International Dehydrated Foods) was founded in 1978 and is a specialized producer of sustainable meat and egg-based nutrition ingredients. Headquartered in Springfield, MO, the company is a partner of choice for clients in the pet food, food and nutrition industries, offering a wide range of natural and clean label product solutions. In pet food applications, the company has become a leading natural ingredient provider, offering taste and nutrition solutions as well as functional ingredients. With its highly recognized customer orientation, ADF/IDF has established a diverse client base consisting of many long-term, close relationships with global and regional pet food and food companies. 

The ADF/IDF’s brand IsoNova offers pet food solutions using egg protein specialties. It develops animal health, functional, and nutritional products. Thereby, Symrise will become a unique player for pet food and nutrition. “With ADF/IDF’s expertise in clean label chicken and egg-based nutrition ingredients Symrise will form a fully integrated supplier of protein specialty ingredients. Customers will benefit from a highly efficient supply chain and natural quality products,” a Symrise statement read.

With the acquisition, Symrise leverages its leadership position in pet food, extending its palatability know-how towards the Premium Nutrition segment. The combination of ADF/IDF and Symrise will furthermore result in an enhanced customer platform and strengthened international footprint. “Symrise will reinforce partnerships with key multinational players as well as fast-growing regional brands in the US, one of its key growth markets. In return, ADF/IDF will benefit from Symrise’s resources and expertise outside the American market. The acquisition offers also cross-selling potential to accelerate long-term profitable growth, especially in the attractive application area of pet food,” the statement further noted.

William Darr, founder of ADF/IDF, added: “We are delighted to have found in Symrise a new strong owner for our company, they share the same values and the same mindset on the further development of the business. In the starting phase of our company, we already worked very closely with Diana, which is today leading Symrise’s nutrition activities. ADF/IDF and Symrise have many things in common. We are both committed to high-quality natural products derived from sustainable resources. And we both drive innovation to develop solutions that best serve our customers’ needs. Our company will benefit from Symrise’s scientific know-how to further improve our products. Also, Symrise’s wide global presence and broad customer base will allow ADF/IDF to expand its business faster.”

In terms of an expansion in food ingredients, Kott notes that the buy offers a North American infrastructure advantage, in a market where Symrise continues to strengthen its foothold through several investments in recent years. “For example, we opened up our food ingredients plant in Georgia last November and we are opening a cosmetic ingredients plant in South Carolina. We are putting up a new spray drying tower for encapsulated flavors in New Jersey. We are doing a new extraction plant for natural flavorings. We see the demand and now we have to make sure that we can increase our capacity and infrastructure in order to keep growing with it,” he explains.

Moving forward, Kott suggests that this could be the last significant buy for some time. “We are of course constantly evaluating opportunities, but let’s close this deal and we go for there. We only make buys that make sense and match our long term profitability and sales targets. We recently announced our long term ambitions and goals until 2025 and this is part of it,” he notes.

Amid the consolidating flavors & fragrances space, Kott does not see this as a defensive acquisition in order to avoid being a takeover target themselves, “rather the opposite in fact.” 

“Givaudan is bigger than the rest, but IFF is not that much bigger than us. Our market capitalization and enterprise value from each of these companies is not easy to consolidate, because all these companies are really big. We should concentrate on ourselves rather than on what others are doing,” he says. 

For Kott, Symrise changed the business model in flavors & fragrances through their 2014 Diana buy, with others following. “In the past, more companies were focusing on flavorings and fragrances. Now in flavorings, everybody also looks into food ingredients, especially from a nutritional aspect. Givaudan bought Naturex and IFF bought Frutarom and others. But we were the ones starting that. We were the first ones starting with cosmetic ingredients that do something good for their skin, now others are doing that too,” he says. 

Symrise is a global supplier of fragrances, flavors, food and cosmetic ingredients. Its clients include manufacturers of perfumes, cosmetics, food and beverages, pharmaceuticals and producers of nutritional supplements and pet food. Its sales of €3 billion in the 2017 fiscal year make Symrise a leading global provider in the flavor, nutrition and fragrance markets. Headquartered in Holzminden, Germany, the Group is represented by around 100 sites in Europe, Africa, the Middle East, Asia, the United States and Latin America.

In an interview with FoodIngredientsFirst at the end of 2018, Jean-Yves Parisot, President of Diana (Symrise Nutrition Division) noted the integration of this French-headquartered business, which reaches a turnover of €600 million and therefore accounts for about 20 percent of the Symrise turnover as a whole (circa €3 billion in 2017).

“When we were acquired in 2014 we had a very strong background in backward integration and pet food. From that time, thanks to Symrise support we could really invest in backward integration and sourcing improvement for ingredients such as mushrooms, banana or cranberries. But it also meant investment in new sites and capabilities for pet food, mainly in spray dry towers for delivering powders,” he notes.

Diana, the Nutrition Division of Symrise, Diana is organized around three business units – Diana Food, Diana Pet Food and Diana Aqua. Diana recently opened a new food ingredients facility in Banks Crossing, Georgia, US. This site, operated by Diana Food, is dedicated to chicken-based solutions from humanely-raised birds. The plant meets high animal welfare standards and will include a range of chicken fat, broth and powder products.

By Robin Wyers