Flavors and fine ingredients company Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; OTCBB:FRUTF) has acquired Montana Food, the flavors and natural food colors division of Peruvian company Montana SA, for $28.5 million in cash and the assumption of $6.5 million debt.
The acquisition includes Montana Food’s operations in Chile. Montana Food has assets worth $24.8 million and sales by Montana’s Flavors and Natural Colors Division amounted to $52.5 million in 2013. The purchase agreement includes a mechanism for future consideration conditional on improvement over current gross profit of the acquired operations during the 18 month period after the deal’s closing. The purchase agreements will be signed within the next few days and the entire transaction will be concluded within the coming weeks. The transaction will be financed by bank debt.
Frutarom Group CEO and President Ori Yehudai said, “We view the Montana Food acquisition with its substantial activity in Peru and Chile, where Frutarom hasn’t been active until now in the field of flavors, as another strategic step that expands our activities in the emerging markets altogether and the growing markets of South America in particular. The acquisition strengthens our presence and market share in markets with high growth potential which Frutarom has identified as attractive markets for its continued development.”
He added that “The acquisition of Montana Food is significant strategic acquisition, which establishes Frutarom as one the world’s top flavor companies.”
Frutarom has made it a goal to expand its growing operations in Central and South America through organic growth as well as acquisitions.
This acquisition follows the acquisition of Guatemalan Aroma in 2013, and the Brazilian flavors company Mylner in early 2012, along with activity established independently by Frutarom in Costa Rica which includes an R&D laboratory and a sales and marketing network.
The latest acquisition will allow Frutarom to strengthen and solidify its presence and market share in Central and South America’s vital burgeoning markets by vastly broadening supply of its products and expanding its R&D, sales and marketing infrastructure. Meanwhile, ownership of a large efficient local production site will help improve service to customers in the region while substantially shortening delivery times and lowering production costs.
The acquisition of Montana Food is Frutarom’s sixth acquisition in emerging markets since 2012. The share of Frutarom revenues from emerging markets has risen sharply from 25%
in the first half of 2010 to 43% in the first half of this year.