Frutarom did not reveal the price it would pay for the IFF business - based in Switzerland and Germany - because of ongoing consultation with employee works council in Germany, adding simply that the operations being acquired had sales of $90 million in 2003. The unit, which manufactures processed fruit and other natural product preparations, operates in a wide variety of product segments, including baked goods and dairy products.
IFF's fruit preparations business also includes operations in Dijon, France, representing 30 per cent of the total European fruit preparations business of the American company, and it is possible that Frutarom will also acquire this unit. However, IFF is still currently consulting with the employee works council at the Dijon site and no final decision has as yet been taken.
IFF said that the decision to sell the European business - and indeed the possible closure of the Dijon facility - came as a result of an ongoing review of its business aimed at reducing production costs and strengthening its market position.
"By consolidating its flavour and fragrance operations into its larger, more specialised sites, IFF can increase capacity utilisation and further improve both production and customer service," the company said in a statement.
As for Frutarom, it sees the addition of the European businesses as a key step towards its target of becoming one of the world's top ten flavour groups.
"The potential acquisition of IFF's fruit preparations business continues the fulfillment of Frutarom's overall strategy to grow rapidly through both strategic acquisitions and organic growth that outperforms industry standards," the Israeli company said in a statement.
"The fruit preparations business will significantly enhance Frutarom's strong position as a global manufacturer of natural flavours and herbal extracts. Frutarom intends to leverage the acquisition to strengthen its position as a single-source food systems supplier that offers comprehensive natural solutions for food applications, including an innovative functional food portfolio."
Frutarom said that while the acquisition would allow it to reinforce its business in Europe, it would also enable it to roll out the 'single-source' strategy to other markets where it already has a significant presence, including eastern Europe, North America and east Asia.
The company said it planned to create additional value for the business by making new investments at the two sites and strengthening its European research and development and applications laboratories to offer state-of-the-art manufacturing and research facilities for its customers.
Frutarom has grown rapidly in the past decade to become a significant global company in the flavour, natural extract, and functional food industries and intends to actively strengthen and solidify its position in these markets in the future. The group posted sales of $143.7 million in 2003, recently reporting revenues of $43.9 million for the first quarter of 2004.