ADM, one of the world's largest grain traders and a major food
processor, said on Monday it would establish a new business unit
called Wild Flavors and Specialty Ingredients and expected to
complete the deal by the end of the year.
Wild Flavors - ADM's first venture into the flavours market -
specializes in natural ingredients. The acquisition comes as
consumers have been showing increasing appetite for foods made of
only natural components.
Sources told Reuters in May that Illinois-based ADM was among
private equity and strategic bidders for Wild Flavors, which sources
said expected 2014 core earnings of almost 140 million euros.
The transaction, which includes around 100 million euros of net
debt, values Wild Flavors at a hefty multiple of 16.4 times its core
earnings against a peer multiple of 11, according to Thomson Reuters
data. ADM is targeting 100 million euros of cost savings by the
third year of the acquisition.
"I think it will be very difficult for them to extract value at such
a high valuation," said Evgenia Molotova, an analyst at Berenberg.
"It's an ambitious target in terms of synergies."
Wild Flavors, headquartered in Zug with management offices in
Heidelberg-Eppelheim, Germany, is the world's sixth-biggest flavour
provider. Hans-Peter Wild, son of founder Rudolf Wild, owns 65
percent and private equity firm KKR 35 percent. Wild is also the
owner of a separate company that makes the drink Capri-Sun but is
not part of the deal.
Sources previously told Reuters that other bidders included Japanese
seasonings maker Ajinomoto, British food ingredients group Tate &
Lyle, Swiss scents and flavours firm Givaudan and private equity
With the purchase of Wild, which is currently advertising a new
summer fruits range on its website, ADM will get access to a wide
variety of flavours, seasonings and colours derived from natural
sources and used in processed foods and drinks.
A source close to the deal said the bidding process was "a close
race" between ADM and Ajinomoto.
RECIPE FOR SUCCESS?
Almost 30 percent of new food manufacturing product launches over
the past two years have been based on the health sector, Molotova
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"The sector attracts a lot of M&A interest, because itís very
cash-generative with stable earnings growth," she added.
"Ingredients is a very unconsolidated market, and there are a number
of private companies that could be interesting."
In April, German scents and flavours group Symrise bought
France's natural ingredients firm Diana Group for 1.3 billion euros.
Since KKR's 2010 investment in Wild, the flavour maker has bought
several companies including Cargill's juice blends business, mint
oil maker A.M. Todd and natural extracts maker Alfrebro. Wild was
founded in Heidelberg, Germany in 1931 as a producer of ingredients
for non-alcoholic beverages.
"Together, ADM and Wild Flavors will create one of the leading
flavor and specialty ingredient companies in the world, with sales
approaching $2.5 billion and significant room to grow," ADM Chairman
and Chief Executive Patricia Woertz said in a statement.
Barclays acted as financial adviser to ADM while Citi and
Freshfields advised the sellside. Skadden, Arps, Slate, Meagher &
Flom LLP acted as legal adviser to ADM. ($1 = 0.7345 Euros)
(Additional reporting by Supriya Kurane in Bangalore; Editing by
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