FRUTAROM CONTINUES TO ESTABLISH ITSELF AS
ONE OF THE WORLD’S TEN TOP COMPANIES IN ITS FIELD
AND ANNOUNCES ITS NINTH ACQUISITION IN 2017
Mr. Ori Yehudai, President and CEO of Frutarom
Group, said: "We are delighted at having signed a
definitive agreement for the acquisition of Enzymotec and its
merger with Frutarom. This acquisition will provide additional
reinforcement to our growing activity in natural specialty fine
ingredients based on innovation which is expanding at a rapid pace.
Following our announcement of the acquisition of Enzymotec shares
and our intention to make a tender offer, we conducted friendly and
professional negotiations with Enzymotec’s board of directors and
reached an agreement on acquiring 100% ownership. This amicable
transaction offers significant advantages to both parties,
including a further boost in value for our shareholders along with
providing a quick and efficient implementation of a growth strategy
and profitability for Enzymotec’s operations as well as a rapid and
effective realization of the significant synergies between the
companies.
The merger will enable full integration of the
companies’ activities in the fields of R&D, sales, marketing,
production, supply chain and logistics while accelerating our joint
growth through many cross-selling opportunities inherent in the
acquisition and the expansion of the product portfolio to both
Enzymotec’s and Frutarom’s existing customer bases. Upon completion
of the transaction we will examine together with Enzymotec
management strategic plans suitable for accelerating profitable
growth and enhancing its activity while implementing the
combination of Enzymotec’s activity and Frutarom’s global activity,
along with attaining maximum operational and business efficiencies,
improving the cost structure and using Frutarom’s global platform
to exploit the great potential concealed in the large investments
made in Enzymotec in recent years in the areas of R&D,
marketing and production. We particularly see Enzymotec’s nutrition
segment as playing an important part in our future profitable
growth strategy that will contribute to the expansion of the
portfolio of comprehensive solutions for customers of both
companies in the fields of pharmaceuticals, dietary supplements,
designated foods for infants in the field of infant formula (where
Frutarom has almost no activity currently) and elderly clinical
nutrition in which Frutarom is active.
“We look forward to welcoming Enzymotec’s
excellent and experienced management team and employees to the
Frutarom family and we are convinced they will provide significant
reinforcement to the ranks of our management, R&D, and sales
and marketing, production and supply chain,” said Mr.
Yehudai.
Mr. Steve Dubin,
Chairman of Enzymotec, said today: “We are pleased
that we have reached an amicable agreement with Frutarom in a
manner that benefits our shareholders. We believe that our
customers will also benefit from the merger through Frutarom’s
global presence and our employees will have the opportunity to
thrive under Frutarom’s leadership as one of the world’s top
companies in its field.”
__________________
Frutarom Industries Ltd.
(“Frutarom” or “the Company”),
one of the world's 10 largest companies in the field of flavors and
natural specialty fine ingredients, announces the signing of an
agreement with special nutrition company Enzymotec Ltd.
(“Enzymotec”), traded on NASDAQ (under the symbol
ENZY),for a merger with Enzymotec in exchange for US$ 11.9 per
share in cash.
Prior to the signing of the merger agreement,
Frutarom had acquired, in prior transactions, approx. 19% of
Enzymotec’s issued and outstanding shares at an overall investment
of approx. US$ 42 million reflecting an average price of
$US 9.6 per share and announced its intention to make a tender
offer for Enzymotec shares. Following negotiations with Enzymotec’s
board of directors the sides agreed that a full merger of the
companies is the proper and best solution for all sides and thereby
arrived at an agreement pursuant to which Frutarom would acquire
the remaining balance (81%) of Enzymotec shares for a cash payment
of US$ 11.9 per share through a merger of Enzymotec and a wholly
owned subsidiary of Frutarom, with Enzymotec becoming a wholly
owned subsidiary of Frutarom and being delisted from trading on
NASDAQ, such that the overall enterprise value in the merger stands
at approx. US$ 290 million, reflecting a value of approx.US$ 214
million net of cash, cash equivalents, deposits and tradeable
securities in Enzymotec’s treasury as of June 30, 2017.
The overall net consideration (net of the cash,
cash equivalents, deposits and tradeable securities in Enzymotec’s
treasury) that was and is to be paid by Frutarom for 100% of
Enzymotec’s shares stands at approximately US$ 210 million,
including cost of vested options, RSU's and estimated transaction
expenses. The total assets acquired (as of June 30, 2017) stood at
US$ 147.8 million, including cash, cash equivalents, deposits and
tradeable securities totaling US$ 76.3 million and a modern
and efficient plant into which approx. US$ 40 million had been
invested. Enzymotec has no material financial debts.
The transaction is subject to customary closing
conditions including approval by the shareholders of Enzymotec.
Frutarom currently anticipates the transaction to close by early in
the first quarter of 2018.
The acquisition will be financed through bank
debt and/or debt from a financial institution.
Enzymotec, which was founded in 1998, develops,
produces and markets nutritional ingredients and medical foods
based on cutting-edge, proprietary technologies. Enzymotec has
developed a unique technology for processing lipids that are an
important nutritional element, supporting various biological
functions. Enzymotec’s proprietary technologies enable extraction
of lipids from natural sources, separation and analysis of lipid
molecules, and use enzymes to synthesize lipid molecules familiar
to the human body. Enzymotec utilizes a proprietary toolset that
allows it to efficiently transform lipids from natural raw
materials into those that have unique structural and functional
characteristics. Enzymotec conducts clinical and pre-clinical
studies according to good clinical practice (GCP) guidelines to
support the safety and efficacy of its products and their
ingredients, to expand known benefits, and to uncover new
benefits.
Enzymotec has two reporting segments: the
nutrition segment and VAYA Pharma segment. The nutrition segment
contributed approx. 77% of sales in 2016 and includes InFat, the
company’s leading infant formula product. Produced through
modifying 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. This product is supported by
clinical and pre-clinical studies demonstrating its positive
effects on beneficial gut flora, intestinal health, bone strength,
infant stools and reduced crying, in addition to reduced
constipation, improved calcium absorption, building up of the
immune system and more efficient energy intake. The product is
currently sold to top multinationals in the infant nutrition
industry through a joint venture between Enzymotec and AAK, a
leading Swedish manufacturer and laboratory for vegetable oils and
fats with extensive global activity. Other activities in the
nutritional segment include krill oil, which is a source for highly
bio-available Omega 3, and Phosphatidylserine (PS), a line of
nutritional ingredient products. PS plays an important part in cell
membrane activity and as a building block for human brain cells and
was shown to improve cognitive functions, mood and skin health.
The activity of Enzymotec’s nutrition segment is
very synergetic with the activity of Frutarom’s Specialty Fine
Ingredients division into which it will be merged. Frutarom will
take steps to utilize and integrate Enzymotec’s R&D, sales and
marketing infrastructure and production and supply chain platform
with those of Frutarom while leveraging and realizing the many
cross-selling opportunities generated by the acquisition both by
broadening the circle of customers and knowledge base and
capabilities, and by expanding the product portfolio and the added
value of comprehensive solutions for the customers of both
companies in the fields of pharmaceuticals, dietary supplements,
designated foods for infants in the field of infant formula (where
Frutarom has almost no activity currently) and elderly clinical
nutrition in which Frutarom is active. Enzymotec products will
benefit from Frutarom’s global sales and marketing platform which
includes over 100 marketing centers and approx. 1,000 salespeople
who sell to over 30,000 customers in more than 160 countries
throughout the world, and Frutarom will take steps to develop and
significantly expand Enzymotec’s nutrition segment and views it as
an important part of its future profitable growth strategy.
Over the past five years Enzymotec has invested
approx. US$ 30 million in extensive R&D activity and clinical
studies, and possesses approximately 100 registered patents and 90
patents pending at various stages of approval throughout the world.
Frutarom trusts that, with the support of Enzymotec’s strong
development center, which will join Frutarom’s 79 R&D centers
around the world, many years of knowledge, the research and patents
it owns, and the next generation of products it has under
development, Frutarom’s own future products will be able to benefit
from significant reinforcement and boost in value to the customers
of both companies such that the acquisition will further enhance
Frutarom’s ability to continue expanding the R&D, production
and marketing of unique natural solutions combining taste and
health in response to major trends and consumer demand for
healthier and more natural products in the global pharmaceutical,
food supplement, food and cosmetics markets. This field is growing
at a fast rate and the combination of Frutarom’s and Enzymotec’s
capabilities will enable Frutarom to take advantage of this synergy
for the benefit of its customers and shareholders.
Enzymotec sales for the nutrition segment for
the 12 month period ended June 2017 totaled approx. US$ 36.5
million with adjusted EBITDA2 of approx. US$ 15.7 million. In the
first half of 2017 sales of Enzymotec’s nutrition segment reached
US$ 19.2 million with adjusted EBITDA2 of US$ 9.3 million.
VAYA Pharma represents Enzymotec’s second
segment and constituted approx. 23% of sales in 2016. Through this
segment Enzymotec develops, manufactures and sells medical foods
for the dietary management of certain medical conditions or
diseases in the areas of early memory impairment, attention deficit
hyperactive disorder (ADHD) in children, and hypertriglyceridemia
(excess triglycerides in the bloodstream associated with increased
risk of heart disease). Supported by clinical studies, the products
are marketed in the United States, Singapore, Turkey and Israel.
This segment first recorded revenues in 2011 and has grown modestly
since but continues to generate losses for Enzymotec. After
completion of the merger, Frutarom will decide on an appropriate
strategy for VAYA with the goal of it delivering a positive
contribution as quickly as possible to Frutarom shareholders.
Enzymotec, with approx. 235 employees, mainly in
Israel and the United States, including 30 in R&D, has an
advanced GMP certified factory in the Sagi 2000 Industrial Park of
Migdal HaEmek which was built in 2007 and expanded in 2013 at an
investment of approx. US$ 40 million and includes an R&D
center, laboratories, a production plant and offices. The plant
enjoys an approved enterprise status which entitles it to
significant tax benefits. Enzymotec’s production capabilities and
products will strengthen Frutarom’s production and technological
infrastructure and portfolio of natural solutions and, upon
completion of the acquisition, Frutarom will 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.
Mr. Erez Israeli, Enzymotec’s President
and Chief Executive Officer, added “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. I look forward to working closely with
management to ensure a smooth and successful transition. We are
confident that this transformative merger will bring new synergies
to both businesses, in particular bringing Enzymotec’s strong
R&D and wealth of knowledge into the Frutarom fold to further
expand Frutarom’s capabilities.”
Mr. Yehudai added: "The
Enzymotec acquisition is a continuation of the implementation of
Frutarom’s rapid and profitable growth strategy and the realization
of its vision “to be the preferred partner for tasty and healthy
success”. This is another acquisition of activities complementary
to Frutarom’s core activities that enable us to offer our customers
a broader and more unique and profitable portfolio of solutions. 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. The Enzymotec acquisition is our ninth
acquisition this year. Since 2015 we have already acquired 28
companies which have been successfully integrated into our global
activity and have been and will continue contributing to further
growth in sales and improved profits and margins through maximal
capitalization on the synergies they bring”.
Mr. Yehudai concluded by
saying: "In the wake of the accelerated internal growth and
the contribution of acquisitions made until now, Frutarom’s rate of
annual sales already approaches US$ 1.5 billion. We are
working at identifying and executing further strategic acquisitions
of companies and activities within the range of our operations. We
will continue carrying out our rapid profitable growth strategy,
which is based on combining profitable internal growth and
strategic acquisitions, in order to achieve the targets we set for
ourselves: sales of at least US$ 2 billion with an EBITDA margin of
over 22% in our core activities by the year 2020”.
Wachtell, Lipton, Rosen & Katz, and Fischer
Behar Chen Well Orion & Co., are acting as legal counsels to
Frutarom.
A Conference Call Will be Held on Monday,
October 30, 2017 at 4:00pm Israel Time (2:00pm GMT; 10:00am
EDT)
Anyone wishing to participate in the call is
invited to place a call at least 5 minutes before the conference
call commences. If you are unable to connect using one of the
toll-free numbers, please try the international dial-in number.
USA Dial-in Number: 1-888-668-9141UK Dial-in
Number: 0-800-917-5108SWITZERLAND Dial-in Number:
0-800-834-878ISRAEL Local Dial-in Number: 03-918-0610INTERNATIONAL
Dial-in Number: +972-3-918-0610
A replay of the call will be available by
telephone beginning Monday, October 30, 2017 for 48 hours
at 03-9255929 (Israel); 1-888-782-4291 (USA);
0800-917-1246 (UK); 0-800-837-191 (Switzerland).
Contact
Details:
roymeltzer@frutarom.com +972-9-9603800
The information in this press release contains
forward-looking statements as defined in Israel’s Securities Law
which could fail to materialize, in full or in part, or materialize
in a materially different manner than expected, as a result of
unexpected developments that are not necessarily under the
Company’s control and/or resulting from the realization of any of
the risk factors as outlined in section 41 of Chapter A of its
annual report. In addition, the following factors, among
others, could cause actual results to differ materially from
forward-looking statements: the occurrence of any event, change or
other circumstances that could give rise to right of one or both of
the parties to terminate the definitive merger agreement; the
failure to obtain necessary shareholder approvals or to satisfy any
of the other conditions to the transaction on a timely basis or at
all; the possibility that the anticipated benefits of the
transaction are not realized when expected or at all, including as
a result of the impact of, or problems arising from, the
integration of the two companies or as a result of changes in the
economy and competitive factors in the areas where each of the
companies does business.
About
Frutarom:
Frutarom (LSE:FRUT) (TASE:FRUT)
is a leading global company operating in the global flavors and
natural fine ingredients markets. Frutarom has significant
production and development centers on all six continents and
markets and sells over 60,000 products to more than 30,000
customers in over 150 countries. Frutarom’s products are intended
mainly for the food and beverages, flavor and fragrance extracts,
pharmaceutical, nutraceutical, health food, functional food, food
supplement and cosmetics industries.
Frutarom, which employs approximately 5,000
people worldwide, has 2 main core activities:
- The Flavors Activity which develops, produces and markets
flavor compounds and food systems;
- The Specialty Fine Ingredients Activity, which develops,
produces and markets natural flavor extracts, natural functional
food ingredients, natural pharma/nutraceutical extracts, natural
algae-based biotechnical products, natural food colors, natural
antioxidants that provide solutions for natural food protection,
aroma compounds, essential oils and unique citrus products. The
Specialty Fine Ingredients products are sold primarily to the food
and beverages, flavor and fragrance, pharmaceutical/nutraceutical,
cosmetics and personal care industries.
Frutarom’s products are produced at its plants
in the US, Canada, the UK, Ireland, Switzerland, Germany, Belgium,
Italy, Spain, France, Slovenia, Poland, Russia, Turkey, Israel,
South Africa, Morocco, China, India, Mexico, Guatemala, Peru,
Chile, Brazil and New Zealand. The Company’s global marketing
organization encompasses branches in Israel, the US, Canada, the
UK, Ireland, Austria, Switzerland, Germany, Slovenia, Belgium, the
Netherlands, Denmark, France, Italy, Spain, Hungary, Romania,
Russia, Ukraine, Poland, Kazakhstan, Belarus, Turkey, Brazil,
Mexico, Guatemala, Costa Rica, Peru, Chile, South Africa, China,
Japan, Hong Kong, India, Indonesia and New Zealand. The Company
also works through local agents and distributors throughout the
world. For further information, please visit the Company’s website
at: www.frutarom.com.
_________________
1 In Frutarom’s estimation. In non-GAAP terms and
net of non-recurrent expenses related to inventory write-downs.
2 In Frutarom’s estimation. In non-GAAP terms
and net of non-recurring expenses related to inventory
write-downs.
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