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Cucumber Beer-Maker Treatt Toasts Investor Exit With Plant Spree

Treatt Plc (TET), the U.K. supplier of mango oil to the Body Shop, is considering the biggest investment splurge in its 127-year history as Chief Executive Officer Daemmon Reeve seeks to unshackle the company from family owned traditions.

The producer of flavors and fragrances will seek investor backing for a new flagship site at its Bury St. Edmunds, England headquarters that in a “worst-case” scenario will cost 12 million pounds ($18 million), Finance Director Richard Hope said in an interview. Six plants on the site could be merged and equipment dating back to the 1970s replaced, he said.

The potential investment marks a new era for Treatt after the exit of Hugo Bovill, whose family had run and owned a stake in the company since 1924. The Bovill family sold their combined 29.07 percent stake on July 10 to a group of institutional investors, removing the threat of an outright takeover and unleashing pent-up growth plans.

“Hugo would never have done this: it would have been -- in his mind -- gambling the shop,” Hope said during the interview conducted in Reeve’s office, where wafts of orange oil from nearby distillers permeate the air. “His approach was take the dividend and keep going as you are. But in the end you die like that.”

The influx of new investors means Treatt will undertake a formal consultation process for their U.K. modernization plan, Hope said.

Takeover Averted

Treatt, established as an ingredients trader in 1886, initially attracted interest from suitors in a sale process advised by Grant Thornton. Yet the Bovill family and ally Bjornstad and Jendal A/S of Norway opted to sell holdings topping 30 percent to the funds.

Their exit follows Hugo Bovill’s replacement as CEO and a disagreement over strategy that together thrust the company into the investor limelight against a backdrop of heightened food-ingredient acquisitions by peers including Symrise AG (SY1) and Frutarom Industries Ltd. (FRUT)

Treatt has now increased the number of investor roadshows to three from one. Its shares jumped 16 percent on May 28 after announcing that sales for the month touched a record and the third quarter was looking “very strong.” It was a timely jump in value that left any potential acquirer facing a resurgent market value of 60 million pounds after a rise of about 50 percent in Treatt shares this year.

Based on average premiums and a share price hovering close to 600 pence, buyers would have needed to bid 800 pence to get negotiations going, and there are other private companies that are easier targets, Hope said.

New Look

Reeve, appointed CEO in August 2012, is bringing a new look to the company. His ascension came after an overhaul of U.S. operations, which he’s replicating in the U.K., now Treatt’s most profitable operation.

With a new CEO, “2013 isn’t the year to disappoint,” Hope said.

Though the planned investment to modernize British operations is a “big number” for Treatt, compared to the 5.5 million pounds that analysts expect, it wouldn’t be “ball breaking,” said Hope, who has been at the company for 10 years. Accompanying the new plant are improvements in pricing, services and efficiency.

“We’ve not been good at business retention in citrus oil, it’s been akin to having a bath with the plug open,” said Hope. “We’re quite good at winning new business, but the next year the business would go away again on price and not managing the customer properly.”

That’s all changing with a greater emphasis on innovation and tapping into new trends, such as fruit-flavored beers, tea-laced drinks, flavored milkshakes and low-calorie alcoholic beverages, trends that tend to start in U.S. before filtering to Europe.

IFF, Firminech Hires

Treatt, which has hired executives from International Flavors & Fragrances Inc. (IFF) and closely held Firminech, “hasn’t even scratched the surface” of the beverage market, according to Hope. It supplies Blue Moon Brewing Co. and provides the cucumber essence in Cigar City Brewing’s Cucumber Saison ale, yet doesn’t disclose the majority of its mainstream clients that make everyday products found on supermarket shelves.

Profit is already rising, and Hope said he’s confident about the 6 million pounds in pretax profit estimated for this year, rising to 6.75 million pounds next year.

“Fragrance gets hit when the economy turns, especially at the high end, but we don’t care where people eat and drink our ingredients at the Ritz, or through Lidl, it doesn’t make any difference as it’s still got a Treatt ingredient,” he said.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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