International Flavors & Fragrances agreed to buy Israeli flavors and ingredients maker Frutarom for $7.1 billion in cash and stock on Monday, vying for the industry’s top spot with market leader Givaudan.
The flavors and fragrances sector was expected to consolidate after Geneva-based Givaudan said in March it planned to launch an offer for French natural ingredients firm Naturex and Israeli media reported last month that Frutarom had attracted takeover interest.
IFF’s takeover of Frutarom, which has been approved by both boards, would be the second largest of an Israeli company, behind Intel’s $15 billion purchase of Mobileye.
“By combining our deep R&D expertise with Frutaroms, we are offering our customers a broader range of solutions and accelerating our growth strategy,” IFF CEO Andreas Fibig said.
Givaudan is expected to post revenue of 5.34 billion Swiss francs ($5.3 billion) this year, not yet taking Naturex into account, analyst estimates collected by Thomson Reuters show.
At present, IFF is broadly on par in revenues with Germany’s Symrise with 3.1 billion euros ($3.7 billion) in expected 2018 sales and unlisted Firmenich of Switzerland.
IFF said the acquisition unites two firms with complementary customers, capabilities and geographic reach that would result “in more exposure to fast-growing end markets.”
Under the terms of the IFF deal, Frutarom’s shareholders will receive $71.19 in cash and 0.249 per share of IFF common stock for $106.25 per share.
IFF, which is paying an 11 percent premium to Frutarom’s May 6 close, also will assume its net debt and the two companies are projected to have combined revenue of $5.3 billion in 2018.
ICC Industries, Frutarom’s largest shareholder with a 36 percent stake, forged a voting agreement with IFF and will vote in favor of the deal, IFF said.
It was not immediately clear how Fidelity Management and Research, the second largest stakeholder with 8.9 percent, will vote.
Frutarom sells more than 70,000 products, such as such as natural colors, health and beauty ingredients, natural food protection and enzymes, in 150 countries to mainly mid-sized companies.