Frutarom to acquire full ownership of Enzymotec at net investment of US$210m
30 Oct 2017 --- Frutarom is embarking on its ninth acquisition of 2017, as the company has announced it will acquire full ownership of Enzymotec, Israel, at a net investment of approx. US$210 million. At of the date of signing, Frutarom held approx. 19 percent of Enzymotec’s shares at an average price of US$9.6 per share. Frutarom will acquire the balance of shares at US$11.9 per share. The transaction will be done via the full merger of Enzymotec into a subsidiary of Frutarom. Total Enzymotec sales in the 12 month period ended June 2017 at US$47 million.
“We are delighted at having signed a definitive agreement for the acquisition of Enzymotec and its merger with Frutarom,” says Ori Yehudai, President and CEO of Frutarom Group. “This acquisition will provide additional reinforcement to our growing activity in natural specialty fine ingredients based on innovation which is expanding at a rapid pace. Following our announcement of the acquisition of Enzymotec shares and our intention to make a tender offer, we conducted friendly and professional negotiations with Enzymotec’s board of directors and reached an agreement on acquiring 100 percent ownership.”
The merger will enable full integration of the companies’ activities in the fields of R&D, sales, marketing, production, supply chain and logistics while accelerating our joint growth through many cross-selling opportunities inherent in the acquisition and the expansion of the product portfolio to both Enzymotec’s and Frutarom’s existing customer bases. Upon completion of the transaction we will examine together with Enzymotec management strategic plans suitable for accelerating profitable growth and enhancing its activity while implementing the combination of Enzymotec’s activity and Frutarom’s global activity, along with attaining maximum operational and business efficiencies, improving the cost structure and using Frutarom’s global platform to exploit the great potential concealed in the large investments made in Enzymotec in recent years in the areas of R&D, marketing and production.
“We particularly see Enzymotec’s nutrition segment as playing an important part in our future profitable growth strategy that will contribute to the expansion of the portfolio of comprehensive solutions for customers of both companies in the fields of pharmaceuticals, dietary supplements, designated foods for infants in the field of infant formula (where Frutarom has almost no activity currently) and elderly clinical nutrition in which Frutarom is active,” explains Yehudai.
“We look forward to welcoming Enzymotec’s excellent and experienced management team and employees to the Frutarom family and we are convinced they will provide significant reinforcement to the ranks of our management, R&D, and sales and marketing, production and supply chain,” he notes.
“We are pleased that we have reached an amicable agreement with Frutarom in a manner that benefits our shareholders,” notes Steve Dubin, Chairman of Enzymotec. “We believe that our customers will also benefit from the merger through Frutarom’s global presence and our employees will have the opportunity to thrive under Frutarom’s leadership as one of the world’s top companies in its field.”
Prior to the signing of the merger agreement, Frutarom had acquired, in prior transactions, approx. 19 percent of Enzymotec’s issued and outstanding shares of an overall investment of approx. US$ 42 million reflecting an average price of $US 9.6 per share and announced its intention to make a tender offer for Enzymotec shares.
The transaction is subject to customary closing conditions including approval by the shareholders of Enzymotec. Frutarom currently anticipates the transaction to close by early in the first quarter of 2018. The acquisition will be financed through bank debt and/or debt from a financial institution.
Enzymotec, with approximately 235 employees, mainly in Israel and the United States, including 30 in R&D, has an advanced GMP certified factory in the Sagi 2000 Industrial Park of Migdal HaEmek which was built in 2007 and expanded in 2013 at an investment of approx. US$ 40 million and includes an R&D center, laboratories, a production plant and offices. Enzymotec’s production capabilities and products will strengthen Frutarom’s production and technological infrastructure and portfolio of natural solutions and, upon completion of the acquisition, Frutarom will take steps to optimize its global resources, including in Israel, with the possibility of attaining substantial savings, along with the many cross-selling opportunities inherent in the acquisition.
“Enzymotec has grown from a small start-up into a leading specialty nutrition company with dedicated and talented employees who will further reinforce Frutarom’s businesses,” explains Erez Israeli, Enzymotec’s President and Chief Executive Officer. I look forward to working closely with management to ensure a smooth and successful transition. We are confident that this transformative merger will bring new synergies to both businesses, in particular bringing Enzymotec’s strong R&D and wealth of knowledge into the Frutarom fold to further expand Frutarom’s capabilities.”
Yehudai adds: “The Enzymotec acquisition is a continuation of the implementation of Frutarom’s rapid and profitable growth strategy and the realization of its vision “to be the preferred partner for tasty and healthy success”. This is another acquisition of activities complementary to Frutarom’s core activities that enable us to offer our customers a broader and more unique and profitable portfolio of solutions. In accordance with this strategy we are continuing to expand the portfolio of natural specialty products we offer our customers based on in-house R&D, through collaborations with universities, research institutes and start-ups, and by means of acquisition as well. The Enzymotec acquisition is our ninth acquisition this year. Since 2015 we have already acquired 28 companies which have been successfully integrated into our global activity and have been and will continue contributing to further growth in sales and improved profits and margins through maximal capitalization on the synergies they bring.”
“In the wake of the accelerated internal growth and the contribution of acquisitions made until now, Frutarom’s rate of annual sales already approaches US$ 1.5 billion,” concludes Yehudai. “We are working on identifying and executing further strategic acquisitions of companies and activities within the range of our operations. 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 for ourselves: sales of at least US$ 2 billion with an EBITDA margin of over 22 percent in our core activities by the year 2020.”
FoodIngredientsFirst recently spoke with Yehudai about acquisitions, consolidation and efficiency. You can read the key interview here.
