Givaudan taps organic trend with $1.6 billion Naturex deal

Bloomberg

Going organic can come with a high price tag. Just ask Givaudan SA.
The Swiss flavours and fragrance company agreed y to buy Naturex for about 1.3 billion euros ($1.6 billion), or 135 euros a share. That’s 42 percent above where the supplier of natural plant extracts closed in Paris trading. The deal values the Avignon, France-based company at 20 to 22 times earnings, according to Vontobel analyst Jean-Philippe Bertschy.
“The move makes strategic sense for sure, as Givaudan is securing a leading position in naturals,” Bertschy said. “That move has however a price, which seems very high for that type of transaction.”
Chief Executive Officer Gilles Andrier is having to swallow the cost of Naturex to bolster Givaudan’s footprint in one of the fastest-growing segments in the personal-care and food industries, as consumers increasingly look to avoid artificial coloring and flavours. Valuations placed on flavour-and-
fragrance companies have soared as more chemical companies are drawn to the high-margin market. Givaudan’s largest purchase for a decade will bring it extracts from green tea to the
recently discovered superfood derived from the leaves of the Moringa tree.
Naturex jumped as much as 43 percent to 135.40 euros in Paris, the biggest gain ever for the company, which has been publicly traded since 1996. Shares of Givaudan were up 2 percent to 2,137 francs in Zurich.

Sought-After
German rival Symrise AG in 2014 paid 14 times earnings for natural-flavors company Diana Group. CEO Heinz-Juergen Bertram said that, although Symrise has the balance sheet to do large acquisitions, the company exited sale processes because multiples had risen as high as 18 times.
Naturex has long been a coveted asset, attracting the interest of both private equity and rivals.
A larger deal “was in the air for some time” and Naturex was a perennial name on on Givaudan’s short list, Bertschy said in a note.
Consumers around the world are increasingly demanding more natural and organic products from food and beverage companies, Givaudan’s flavours-divisio head, Louie D’Amico, said in the statement.
In a first step, the Vernier-based company will acquire 40.6 percent of Naturex’s shares at 135 euros each, and then will begin a tender offer for the remaining stock at the same price, Givaudan said in a statement. The companies didn’t identify the sellers. Naturex declined to comment and a Givaudan representative wasn’t immediately available.
Board members Paul Lippens and Olivier Lippens own about 24 percent and another director, Helene Martel Massignac, holds about 15 percent, according to data compiled by Bloomberg.
Naturex’s board and management support the transaction, according to Givaudan.