IFF continues divestment strategy with sale of Flavor Specialty Ingredients Business to Exponent in US$220M deal
17 Feb 2023 --- Just a few weeks after selling its Savory Solutions Group for US$900 million, IFF is poised to sell its Flavor Specialty Ingredients (FSI) segment to UK-based private equity firm Exponent for US$220 million.
The transaction will be finalized in the third-quarter of this year, subject to customary closing conditions.
The business is simplifying its operation after a complex Q4 where net sales decreased 6% to US$2.84 billion.
Cash proceeds from the transaction will be used to reduce outstanding debt, according to IFF.
In its full-year results for 2022, IFF disclosed it reduced its long-term debt by US$944 million last year – from US$14.8 billion to US$13.86 billion).
Strengthening the core business
IFF is looking to maximize shareholder value and reduce debt in a portfolio optimization strategy.
“Aligned with our strategy, we’re continuously evaluating our portfolio to identify opportunities to strengthen our financial profile,” says Frank Clyburn, IFF CEO.
“The sale of FSI will improve our capital structure while allowing us to focus on our core businesses to enhance growth and returns. We appreciate the contributions of our FSI colleagues, who have shared our commitment to quality and customer service. We will work closely with Exponent to have a successful transition and look forward to FSI’s bright future.”
IFF reduced its long-term debt by US$944 million last year.FSI division
FSI is a manufacturer of synthetic and natural base aroma chemicals used in the flavor market and reports through IFF’s Scent division. The scent division saw a 2% decline in sales in Q4.
Inside the Scent division, FSI generated US$100 million in revenue over the last 12 months and has 340 employees.
“IFF’s FSI is a leading manufacturer of specialty base aromas with a broad range of more than 1,000 aroma chemicals and natural extracts, which provide inputs primarily to the flavor market.”
“FSI includes four dedicated manufacturing and distribution facilities at Teesside and Hartlepool, UK; Cincinnati, US; and Pucheng, China, with additional points of distribution in Mexico, Brazil and Hong Kong.”
Navigating headwinds
Due to sky-high inflation, the company revealed it had to increase prices and cut on costs during the last year. Among headwinds, the company names in its financial statements the impact of foreign exchange, pricing actions, raw materials, energy and sourcing, logistics and manufacturing costs.
Despite this, full-year sales increased in three of its four divisions, reaching an overall growth in sales of 7% – 20% for Pharma Solutions, 9% for Nourish and 2% for Scent – with flat growth only in Health Biosciences.
“IFF delivered solid financial results in 2022 in what continues to be a challenging operating environment,” said Clyburn at the time.
“Throughout the year, our team successfully executed on what we could control – pricing, productivity and portfolio optimization – to generate strong sales growth, enhance profitability and reduce our debt,” he continued.
The company is expecting its sales to grow 6% in 2023.
IFF is not only engaging in divestment strategies. In 2022 it completed its acquisition of Health Wright Products, a move set to bring formulation and finished format capabilities to IFF’s Health & Biosciences probiotics.
By Marc Cervera
