“May we live in interesting times” came to mind immediately i saw that the other weeks rumours that IFF was seriously considering acquiring Frutarom, had actually come true. The fact that the lid was blown off this deal before the fact is another story but have the Board and Senior Management of IFF lost their minds? Congratulations to Ori but he and the Frutarom shareholders are the only winners in this deal which could be the last one that Andreas Fibig, ever does for IFF.
While Frutarom was off busily buying up small and mid size companies and lauded by all and sundry that they were going to shake up the industry and be a leader in the Top 10, I had always believed that Frutarom was always just another Private Equity play but with a difference in that it was a “long” game but one that’s ultimate goal was to sell up and make a killing.
With the IFF stock price staying down 10%, with no bounce back, it shows that current and future investors are not happy with IFF and why should they be! All that talk from Fibig about his admiration for Frutarom and how Frutarom will add so much value to IFF, is just a load of rubbish and shows a desperate Senior Management who don’t know how to grow their own business without paying ludicrous amounts of money for average companies (Ottens Flavors and David Michaels are recent examples of this excess). When it comes to Frutarom, you can put lipstick on a pig but it’s still a pig or as I like to put it “a bag of nuts and bolts masquerading as a global company”.
I really feel sorry for the many small private companies that signed up to the story of being part of an aggressive upstart global company and now they have been sold out and the ones who will suffer are the thousands of employees that will eventually lose their jobs as IFF aaggressively goes after all synergies possible. The deal is 20.3 times multiple of 2018 EBITDA for basically a collection of companies where little integration had been undertaken, but with planned synergies this is claimed to come down to 14.3 times so this is a lot of cost savings to extract in employee cuts and factory closures, which we will bear witness to over the next few years.
On the flip side, at least Frutarom and IFF are out of the acquisition business, which will allow other companies to have a chance to make some deals!
Comments
3 responses to “The biggest folly in the F&F Industry.”
IFF has always played to Wall Street, "bigger and better".
This acquisition makes no sense at all! All disconnected pieces from the whole. I loved the old IFF, this is just stupid!
You are correct, perceptive and succinct in your views. Where is the technology? This will be a situation where IFF is buying revenue, and then reducing expenses (people, as you mention). IFF now has a large hole to dig out of, and now I suspect, lower margin business to shed or improve.
Trevor,
Interesting comments! Will be interesting to see what happens. Hope you are doing well. ADM has been buying a bunch of companies as well, but I am still mostly only focused on flavor sales.
Regards.
David Schisla