Enzymotec on board in Frutarom’s $168m natural and infant nutrition investment
Under the terms of the deal, Frutarom have bought the remainder of shares in Enzymotec at €10.2 ($9.6) per share, building on the 19% the company purchased back in July of this year for €36.1m ($42m).
The deal becomes Frutarom’s ninth acquisition of 2017, having successfully taken over the likes of Unique Flavors in South Africa and Mühlehof in Switzerland for €5.9m ($7m), which generated sales for the 12 months to end-June of €2.9m ($3.4m).
Frutarom have made no secret of its ambition to expand its supplements and functional foods footprint.
The firm’s raft of acquisitions follows a firmly established trend driving the growth of Frutarom in which it seeks to satisfy global demand for products that are ‘natural’ and ‘local’ as consumers move away from synthetic ingredients and adopt a homegrown approach.
“This is another acquisition of activities complementary to Frutarom’s core activities,” said Ori Yehudai, president and CEO of Frutarom Group.
“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.”
Infant nutrition interests
Also attractive to Frutarom’s strategy is Enzymotec’s nutrition segment, which contributed approximately 77% of sales in 2016 and includes InFat, the company’s leading infant formula product.
By changing the molecular structure of vegetable oils, InFat closely mimics the composition, structure and nutritional value of the fat found in human breast milk and is beneficial for proper infant health, development and comfort.
The product is currently sold to a range of multinationals in the infant nutrition industry via a joint venture between Enzymotec and AAK, a Swedish manufacturer and laboratory for vegetable oils and fats.
Other activities in the nutritional segment include krill oil, a source for Omega 3, and Phosphatidylserine (PS), a line of nutritional ingredient products.
“We particularly see Enzymotec’s nutrition segment as playing an important part in our future profitable growth strategy,” added Frutarom.
“This will contribute to the expansion in the fields of dietary supplements, designated foods for infants in infant formula (where Frutarom has almost no activity currently) and elderly clinical nutrition in which Frutarom is active.”
Enzymotec sales for the nutrition segment for the 12-month period ended June 2017 totaled around €31.3m ($36.5m) with adjusted EBITDA of approximately €13.5m ($15.7m).
In the first half of 2017 sales of Enzymotec’s nutrition segment reached €16.5m ($19.2m) with adjusted EBITDA of €8m ($9.3m)
“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,” said Erez Israeli, Enzymotec’s president and chief executive officer.
“This transformative merger will bring Enzymotec’s strong R&D and wealth of knowledge into the Frutarom fold to further expand Frutarom’s capabilities.”
Further deal terms
Further terms of the deal will see full merger of Enzymotec into a wholly owned subsidiary of Frutarom with Enzymotec delisted from trading on NASDAQ.
Enzymotec’s 235 employees are based mainly in Israel and the US, including 30 in R&D. Its factory, located in the Sagi 2000 Industrial Park of Migdal HaEmek, a city in the Northern District of Israel, enjoys an approved enterprise status, which entitles it to significant tax benefits.
Frutarom said it would “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”.
Since 2015, Frutarom have acquired 28 companies boosting its rate of annual sales to €1.29bn ($1.5bn).
“We will continue carrying out our growth strategy, which is based on combining profitable internal growth and strategic acquisitions, in order to achieve sales of at least €1.72bn (€$2bn) with an EBITDA margin of over 22% in our core activities by the year 2020,” said Yehudai.
"The Enzymotec acquisition is a continuing realization of our vision “to be the preferred partner for tasty and healthy success”.