Flavors and fine ingredients maker Frutarom Industries Ltd. (TASE: FRUT; LSE: FRUT; Bulletin Board: FRUTF) has acquired 75% of Russia's Protein Technologies Ingredients Group (PTI), a maker of savory and seasoning compounds, for $50.3 million, reflecting a company value of $67 million. Frutarom will finance the acquisition with a bank loan.
Frutarom president Ori Yehudai said that the acquisition of PTI, the company's second acquisition in 2013, would be followed by more strategic acquisitions of companies and businesses in the industry, with anemphasis on high-growth markets.
PTI was founded in 1996, and its founders will keep their jobs. Frutarom will merge PTI's savory taste solutions business with its Flavor business, and will merge PTI's trade and marketing segment, which sells raw materials that are not manufactured by the company, with its Trade and Marketing business.
Frutarom has a three-year option to acquire the rest of PTI at a price reflecting a 6-7x multiple of PTI's average earnings before interest, taxes, depreciation and amortization (EBITDA) in the three years prior to exercising the option. PTI has over $40 million in assets and no debt.
Turnover of PTI's core business of savory taste solutions reached $60 million in 2012, after several years of double-digit growth, and has operating profit margins similar to those of Frutarom’s Flavor activity. PTI's trade and marketing segment had a turnover of $50 million in 2012.
PTI has new sales and marketing R&D center in Moscow, two production sites outside the city, and application labs and 25 distribution centers across Russia and neighboring countries. It has 500 employees, including 40 in R&D.
Frutarom said that, following the acquisition, it will become one of the few global players with substantial production and R&D operations in Russia
“The acquisition of PTI continues the implementation of the rapid growth strategy of the Frutarom Group, and its vision to be the preferred partner for tasty and healthy success. This a major strategic acquisition, which bolsters Frutarom’s position as one of the world’s largest and leading flavor companies, which is positioned as a leading global manufacturer of savory taste solutions. This acquisition reinforces Frutarom’s technological capabilities and expands both the range of savory flavors (non-sweet tastes) and functional products offered to worldwide customers and its wide global customer base," said Yehudai.
“Frutarom considers the savory taste solutions business an important and strategic growth engine and invests in the development of unique products, with high added value, across its global sites. The acquisition of PTI, following prior acquisitions, is another step in the establishment of Frutarom’s leadership in this important area, and we plan to continue investing in the expansion of our savory business in other countries, including through acquisitions."
Since 2006, Frutarom has acquired a string of European companies, including Germany's GewurzMuhle Nesse, Gewurzmuller, and Christian Hansen's functional blends business, Britain's East Anglian Food Ingredients Ltd. and Savoury Flavours Ltd., the savory business of Norway's Rieber & Sons ASA, US's Flavor Specialties Inc., Slovenia's Etol and South Africa's JannDeRee Ltd.
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2013
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