Frutarom acquires control of fragrance company Turpaz at a company value of US$15.1m
07 Sep 2017 --- Frutarom has announced that it has signed an agreement for the purchase of 51 percent of the shares of the Israeli company Turpaz Perfume and Flavor Extracts Ltd at an overall cash-free debt-free company value of NIS 53.7 million (approx. US$15.1 million). The move is Frutarom's seventh acquisition of the year and continues the company’s implementation of its rapid and profitable growth strategy.
The consideration paid by Frutarom for the shares is approx. NIS 14.5 million (approx. US$4.1 million), and in addition Frutarom injected an investment of approx. NIS 27 million (approx. US$7.6 million) into the company. The agreement includes an option for the purchase of the remaining balance of Turpaz shares starting about four years from the date of completion of the transaction at a price based on Turpaz’s business performance during the two years leading up to the date of notification on exercising the option.
The transaction was completed upon signing and financed through bank debt.
According to Turpaz’s management reports, its sales turnover for the 12 months ending in June 2017 totaled approx. NIS 23.3 million (approx. US$6.2 million) and it exhibited higher profit margins than Frutarom’s Flavors division into which it will be consolidated. Turpaz began its activities in 1970 and engages mainly in the development, production and marketing of fragrance solutions. Turpaz, with 16 employees, has an R&D, manufacturing and marketing site in Israel and recently opened a center for R&D, production, sales and marketing in the US state of New Jersey.
Turpaz has a diverse portfolio of products and solutions which are based on considerable know-how and experience, and a broad customer base, and has exhibited impressive growth rates in recent years while improving its profitability margin. Frutarom decided to launch a strategic move of developing global activity in fragrances, with emphasis on emerging markets with high growth rates.
The Turpaz acquisition joins Frutarom’s small existing fragrances businesses situated mainly in India, in Africa and in Latin America. The global fragrances market was estimated in 2016 at US$13.2 billion (a larger scope than flavors which is estimated at US$11 billion) with projections for sales in the flavors and fragrances markets to grow at an annual rate of 3 percent between 2015 and 2020.
Ori Yehudai, President and CEO of Frutarom Group, says: “The acquisition of Turpaz is an important step towards the implementation of Frutarom’s strategy to develop global business in fragrances. The field of fragrances is synergetic and complementary to the field of flavors in terms of, among other things, raw materials and production processes, and many players in Frutarom’s fields of activity engage in both flavors and fragrance activities together. Frutarom’s strong management is now solid enough and well enough established to develop this additional area of activity.”
“We see interesting and diverse growth opportunities for fragrances, especially in emerging markets, and the potential to perform acquisitions of companies with combined flavor and fragrance activities, including in countries where Frutarom is already active, with the potential to realize interesting operational synergies,” said Yehudai. “In the past, we would forgo opportunities to acquire companies whose main activity was fragrances and with just a smaller amount in flavors. In the framework of our recent strategic decision to develop a global fragrances business, we can now move forward with such acquisitions as well. We are happy to disclose that we have an interesting pipeline of acquisitions in fragrances which we are pushing forward.”
In conclusion, Yehudai says: “The Turpaz acquisition is a continuation of the implementation of Frutarom’s rapid and profitable growth strategy. This is the seventh acquisition we have made this year after having acquired Unique Flavors in South Africa, the French flavors company René Laurent, the Vietnamese flavors company WFF, SDFLC in Brazil with its flavor solutions for ice creams and desserts, Flavours and Essences in the UK and Mühlehof in Switzerland. 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 profitable growth strategy, which is based on combining profitable internal growth and strategic acquisitions, in order to achieve the targets we set: sales of at least US$2 billion with an EBITDA margin of over 22 percent in our core activities by the year 2020.”
