Israel’s Frutarom was acquired by IFF last year in a deal worth $7.1 billion.
Frutarom has agreed to pay approximately $1.3 million for a majority stake in Vietnam’s Western Flavors Fragrances Production (WFF), just a day after revealing that it would continue its M&A strategy by focusing on smaller companies with cheaper valuations.
The deal includes an option for the Israeli firm to buy out the remaining shares in WFF four years after completion, with the price to be determined by WFF’s future performance.
The Vietnamese company is involved in the development, production and marketing of flavors, mostly in the field of sweet flavours and with emphasis on the dairy, beverages, confectionery and baked goods segments. It has 44 employees and recorded sales for the year to February of $1.5 million.
It operates a plant and laboratory in Ho Chi Minh City and a sales and marketing office in Hanoi. Frutarom intends to build a modern flavours factory in Ho Chi Minh City, which will increase WFF’s capacity and enable it to significantly accelerate growth both in Vietnam and growing markets nearby.
Frutarom president and CEO Ori Yehudai said: “The acquisition of the Vietnamese flavours company WFF is the continuation of Frutarom’s implementation of its rapid and profitable growth strategy and fulfillment of its vision ‘to be the preferred partner for tasty and healthy success’. The acquisition will contribute to strengthening our position in Vietnam with the attaining of a significant relative advantage of having a local R&D, sales production presence in one of southeast Asia’s important growing markets.
“We intend to take steps to quickly combine the broad supply of Frutarom’s product portfolio in the growing Vietnamese market while exploiting the many cross-selling opportunities opening up to us in Vietnam, along with strengthening WFF’s management and R&D, production, sales and marketing capabilities and combining our existing activity in Vietnam and southeast Asia with WFF’s activity.”
The announcement comes a day after Yehudai told Bloomberg that it would step back from larger acquisitions, focusing instead on smaller and mid-sized companies with cheaper valuations. “Industry consolidation has driven up valuations, making bigger targets less attractive,” Bloomberg quoted him as saying.
On Tuesday, Frutarom agreed to acquire French flavour producer René Laurent for $21.3 million.
And according to Bloomberg, the company has 20 small and medium-sized acquisitions in the immediate pipeline.
Yehudai continued: “We are working on finding and making further strategic acquisitions of companies and activities in our fields of operations, with special emphasis on markets with high rates of growth in Asia, Central and South America, Central and Eastern Europe and in Africa. The implementation of this strategy has led to the percentage of our sales in emerging markets having grown from 27% in 2010 to 42% in 2016 while the scope of activity has more than quadrupled. We will continue carrying out our rapid and profitable growth strategy, which is based on combining profitable internal growth and strategic acquisitions, in order to achieve the targets we recently set: sales of at least $2 billion with an EBITDA margin of over 22% in our core activities by the year 2020.”
© FoodBev Media Ltd 2021
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