Frutarom Industries Ltd. (“Frutarom”, the “Company”) hereby announces that today it signed an agreement for purchase of the full share capital of the International Aroma Group, a Panamanian company, holder of the Guatemalan Aroma group (“Aroma”), in return for a net cash payment of US$12.5 million (US$13 million, with a deduction of Aroma’s cash balance and cash equivalents in the amount of US$0.5 million). The share purchase agreement contains a mechanism for payment of future consideration, under which an additional payment will be made at the rate of the EBITDA achieved above US$2.25 million over the years 2013 to 2015, and a price adjustment mechanism based on net assets as at November 30, 2013. The transaction was completed at the time of signing, and financed through the Company’s cash balance.
Aroma, established in 1990, deals in the development, manufacture and marketing of flavor solutions, including mainly sweet flavors for beverages, dairy products, confectionary, snack food and convenience foods. Aroma has 57 employees, a production, development and marketing site in Guatemala City and a wide customer base which includes leading international food and beverage manufacturers as well as local food and beverage manufacturers in Guatemala, Honduras, Costa Rica, El Salvador and other developing countries, mainly in Central America. Aroma’s founder and manager will continue managing Aroma, together with Frutarom’s management.
In the years ending December 31, 2011 and December 31, 2012 Aroma’s sales turnover stood at US$5.5 million and US$6.3 million, respectively. Aroma sales over these years grew by 28.3% and 14.5%, respectively. Aroma’s EBITDA in 2011 stood at US$2.0 million and in 2012, US$2.3 million. Aroma has no debt. Aroma is growing in both the local market as well as in export, and is acting to expand its business in neighboring countries. It is the Frutarom’s estimate that the acquisition of Aroma will significantly expand Frutarom’s activity in Latin America, and will strengthen its presence and market sector in these markets, which Frutarom has identified as attractive markets for further expansion. This acquisition in Latin America is a natural addition following the acquisition of the Brazilian flavor company Mylner, which Frutarom acquired at the beginning of 2012, and to Frutarom’s independent operations established in Costa Rica, which includes a development lab and marketing and sales infrastructure. It is the Company’s intention to integrate its activities in Costa Rica with Aroma’s activities, which will become a center for research, development and production for countries in Central America. It is the Company’s estimate that the acquisition will allow Frutarom to strengthen and deepen its presence and market sector in these developing markets in Central and South America, while expanding its product portfolio and increasing its research, development, marketing and sales infrastructure, with an emphasis on local production options and improving its customer service in the region.
Low production costs in this region give Aroma a significant advantage in production, and contribute to its profitability. Frutarom estimates that this acquisition will add the advantages of the presence of a local manufacturer in Latin America and will bring about significant operational savings through transfer of production to the Aroma site, as well as shortening supply times and improving customer service in the region.
It is Frutarom’s intention to utilize this acquisition, and to combine Aroma’s production, R&D, marketing and sales infrastructures, as well as Frutarom’s global R&D, marketing and sales infrastructure, for the purpose of leverage and realization of the many cross selling options this acquisition creates. Frutarom can further leverage Aroma’s production capacity for its business in the area.
Note that Frutarom does not consider this acquisition to be the acquisition of a substantial asset.
This report includes forward-looking statements, as defined by the Israeli Securities
Law – 1968. This forward-looking statement includes, inter alia, data, forecasts, goals, objectives, and/or other information relating to future events or circumstances which may or may not be realized and which are not solely in Frutarom’s control.
These forward-looking statements are based on estimates determined by Frutarom’s management which are determined, among others, by the information available to the management at the time of publication, including estimates relating to the activities of Frutarom, objectives, goals, strategies, events and future intentions.
By their nature, forward-looking statements involve risk and uncertainty and are not guarantees of future performance. The realization or lack thereof of forward-looking statements will be determined by risk factors that characterize Frutarom’s activities, changes in the environment and external factors that exert influence upon the Frutarom Group (including Aroma) and its activities.