Israeli flavors and natural specialty fine ingredients company Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT) announced today that it has signed an agreement to buy 60% of Thai company The Mighty CO. LTD. (including the activity of Maharaj Food Co. Ltd. and Mighty International Co. Ltd.) for THB 393 million ($12 million) (not including debt) and at a valuation of THB 655 million ($20 million) (not including debt).
Under the terms of the deal, Frutarom will initially acquire 49% of Mighty and, subject to a number of conditions precedent and regulatory approvals in Thailand, will raise its holdings to 60%. The deal includes a mechanism for future consideration subject to Mighty’s future performance and an option for the purchase of the balance of holdings in Mighty in two stages in periods beginning three years and five years from the date the transaction is completed. The first part of the transaction will be completed in the upcoming weeks and Frutarom estimates that raising its holdings to 60% will be completed within several months. The acquisition will be financed by independent means and through bank debt.
Mighty’s sales turnover in the 12 months ended August 2017 were THB 500 million ($15 million) after having registered average annual growth of 12% over the past four years.
Mighty, which was founded in 1989, develops, produces and markets flavors, including savory taste solutions (the non-sweet spectrum of flavors). The company has a leading position in Thailand’s flavors market where there are very few producers of taste solutions, and is among the most innovative flavors companies in Southeast Asia based on independent R&D.
The acquisition of Mighty is Frutarom’s second acquisition this year in Southeast Asia after buying Vietnamese flavors producer WFF, and is part of Frutarom’s strategy to significantly expand its activity in Asia. In this framework Frutarom acquired in 2015 the Indian flavors company Sonarome and the Chinese/Hong Kong taste solutions company Inventive, and in 2016 inaugurated a new modern flavors plant, including an advanced R&D laboratory, in Shanghai, China. Frutarom intends to continue significantly expanding its activity in Asia based both on rapid organic growth and an interesting acquisition pipeline including in additional key regional countries, along with optimal exploitation of the many cross-selling opportunities and taking steps to integrate the procurement, production, R&D and sales and marketing platforms in the countries of the region.
The owners of Mighty, Dr. Vasan Rattananupap who serves as the company’s President & CEO and its chief R&D officer, Watchareekul Rattananupap, the company’s VP Sales and Marketing, and its COO Boonsong Pujanasuvonchai will continue to manage the company and will join Frutarom’s managerial ranks in the field of flavors in Asia.
Frutarom Group president and CEO Ori Yehudai said, “The acquisition will contribute towards strengthening our position in Thailand while attaining a significant comparative advantage of proven innovative R&D capabilities and an advanced local sales and production center in one of Southeast Asia’s most important and fastest growing markets. We continue to view Southeast Asia as an important region in our map of future growth and are examining further transactions in the region that will allow accelerated growth in our core activities.
He added, "The Mighty acquisition is our eighth acquisition this year, following 27 acquisitions we have made since 2015 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. We have an outstanding pipeline of further strategic acquisitions of companies and activities within the scope of our operations and 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: sales of at least US$ 2 billion with an EBITDA margin of over 22% in our core activities by the year 2020.”
Published by Globes [online], Israel business news - www.globes-online.com - on October 18, 2017
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