International Flavors & Fragrances Inc. (NYSE: IFF) is a New York based, international company that is a leading global manufacturer of fragrances and flavors used in a wide variety of consumer products, including the food industry and the perfume industry. IFF has annual revenues of US$2.8 billion and employs 5, 900 people worldwide.
Aromor Flavor and Fragrances Ltd., which is based in Kibbutz Givat Oz, near the town of Afula in Israel, manufactures certain complex specialty ingredients used in fragrances and flavours.
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The fragrance industry is a specialized corner of the manufacturing world, and one that can be significantly profitable. Based on its recent share price, with 81.5 million shares outstanding the company currently has a market capitalization of almost US$7.1 billion – which is about six times its book equity. This also reflects a trailing twelve months P/E ratio of almost 20 x earnings, and 2.5 x total revenues for its 2012 fiscal year.
Aramor has annual sales of about US$35 million and IFF is paying for the deal out of its own financial resources. The price IFF has paid for the acquisition has not been disclosed, though if it is using a similar price to revenue ratio it may have paid up to around US$85 million for it.
IFF’s CEO Doug Tough said, “We are pleased to complete this important strategic acquisition. We expect Aromor, with its strong R&D capabilities, to provide us with cost-effective, quality materials to use in our formula creations and external sales.”
Nicolas Mirzayantz, IFF Group President for its Fragrances division also added “A key component of our overall ingredients strategy is to provide cost-advantaged, specialty molecules that enhance our development of consumer preferred fragrance compounds.”
Importantly for Israel and for Aramor IFF intends to keep investing in the Aramor R&D capabilities, as Mirzyantz confirmed, “We plan to continue to support the Aromor facility in Israel and invest in and develop their R&D and manufacturing capabilities in order to strengthen the development and production of specialty ingredients.”
Mrs. Karen Cohen Khazon, the Aromor CEO and President responded, “Aromor is delighted to join the IFF family as it will enable accelerated growth for our business. Our R&D expertise, combined with IFF, will enable increased new product development and technology advances.” The deal is something of a coup for her having been appointed to the job as CEO only in September 2012.
Aromor was founded in 1982, and is based in Israel in Kibbutz Givat Oz with sales offices in the United States. With about 90 employees Aromor is engaged in the development, production and marketing of Natural, Natural Identical and Synthetic high added value aroma and flavors ingredients for the perfume, cosmetics and food industries.
Aromor makes a wide range of products includes natural, & synthetic raw materials for the flavours and fragrances industry.
The company’s production plant is geared exclusively to high value-added export markets in Europe, Asia, North America and Latin America.
Kibbutz Givat Oz held 50% of Aromor’s stock, so will be a major beneficiary of this transaction. Daniel Porat of Lemiro Investment is Chairman of the company, so quite likely a significant exit for him as well.
The products Aromor makes sound very exotic indeed, and include both natural ingredients and some very sophisticated synthetic organic chemistry that builds molecules that mimic those found in nature as well, only more economically and in a controlled process environment.