A mere week after the shareholders at Enzymotec Ltd. (Nasdaq: ENZY) gave final approval for the company's merger into Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; Bulletin Board: FRUTF), employees of the acquired company are already receiving letters summoning them to pre-dismissal hearings. Employees are being laid off at all levels of Enzymotec. The laid off employees have a profile similar to that of those being laid off at Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA): production employees working on chemicals, high-ranking chemists, quality control personnel, and so forth. They will be looking for jobs in a market saturated with similar jobseekers, except for a small proportion suitable for integration into the food industry. Enzymotec's headquarters and production facilities are in Migdal HaEmek.
Frutarom's share price is down today, with the company's market cap at NIS 18.1 billion.
Frutarom said, "The processes of the merger between Frutarom and Enzymotec are progressing in accordance with the agreed plan in order to speed up growth in Frutarom's strategic core areas, while conducting important and essential streamlining and improvement of Enzymotec's profits. We plan to attain maximum operational and business efficiency, improve the cost structure, help the company recover, and realize Enzymotec's great potential."
Frutarom began a hostile takeover of Enzymotec, and eventually convinced the company's shareholders to sell the company for $210 million. Enzyomotec, a relatively new industrial company, has experienced major fluctuations in sales, a general trend towards stagnation, and losses in recent years caused mainly by low prices resulting from competition in one of its main markets - the Krill oil market (a food additive containing omega 3 that is produced from krill, a small crustacean, rather than from fish). The company revenue fell 2% to $25 million in the first half of 2017, and it lost $2.3 million, compared with a $1.6 million profit during the corresponding period last year.
Enzymotec's planned growth engine is its Vaya products, an independent brand of food additives shown in small clinical trials to be effective in the treatment of certain medical conditions (lowering cholesterol, treatment of attention disorders, and preventing memory loss at an advanced age). It was previously reported, however, that Frutarom was considering abandoning this line of products, which differs from its other activity, because it requires direct marketing to the consumer in the US and comprehensive effectiveness studies.
The Vaya activity has also posted losses in recent years, while the food additives marketed to large companies, not directly to consumers, was profitable. Enzymotec's marketing costs totaled $9.5 million in the first half of 2017, most of which was due to Vaya. It is therefore logical to assume that most of the layoffs will be from this line of products, and will include the company's marketing personnel in the US. Enzymotec had $76 million cash at the end of the first half, which will now accrue to Frutarom.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 18, 2017
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