Symrise’s $1.8 Billion Diana Deal Helps Close Gap on Rivals

Symrise AG’s planned 1.3 billion-euro ($1.8 billion) purchase of French flavors and pet-food additive maker Diana Group helps the German company close the gap on larger rivals Givaudan SA and International Flavors & Fragrances Inc.

The company has entered into exclusive talks with owner Paris-based buyout firm Ardian Sarl, formerly known as Axa Private Equity. A deal is expected to be completed in the third quarter, Holzminden, Germany-based Symrise said in a statement. It expects the acquisition to be earnings accretive from 2015.

Chief Executive Officer Heinz-Juergen Bertram is seizing the opportunity to acquire one of a limited number of larger targets in the flavors and fragrance industry to accelerate its growth and access natural raw materials. The purchase of Vannes, France-based Diana also adds a pet-food additives business whose earnings are more resilient to the ups and downs of consumer spending.

“Although Symrise’s interest in Diana was flagged in the media in February they will have some explaining to do in Monday morning’s analyst call because Diana’s biggest business is pet not human nutrition and the price is punchy,” Adam Collins, an analyst at Liberum, said in a note.

The Symrise deal values Diana at about 14 times its earnings before interest, taxes, depreciation and amortization, which totaled about 425 million euros in 2013, with margins of about 21 percent.

‘Major Milestone’

The combined business will have pro-forma sales of nearly 2.3 billion euros, Symrise said. Market leader, Givaudan of Switzerland, generated the equivalent of 3.6 billion euros in sales last year, according to Bloomberg data.

“The proposed acquisition represents a major milestone for Symrise right after our 10th anniversary, and is fully in line with our strategic objective to further accelerate profitable growth,” CEO Bertram said in the statement.

The flavors and fragrance industry is dominated by four leaders, a group that also includes closely held Firmenich International SA of Switzerland.

Another forthcoming opportunity is Wild Flavors GmbH. Owner Hans-Peter Wild and buyout firm KKR & Co. are exploring strategic options including a sale of the maker of flavorings for food and beverages, people with knowledge of the matter said in January.

Pet Food

The French company’s offering spans food additives based on natural vegetable and animal-based products and colorings used in beverages, sweets and sauces. It’s expanded into the nutraceutical market, where nutrition and ingredients are formulated to try to prevent and combat diseases. Last month, Diana agreed to collaborate on cancer research with the Oregon Translational Research and Development Institute, providing expertise on plant cell cultures.

Bertram may need to convince some investors that diversifying into the pet-food business is the correct path to take, Collins said. His likely rationale will likely be that both businesses use natural ingredients and have the similar dynamics, and that Diana will benefit from Symrise’s global network, the analyst said.

Stamford Partners LLP acted as the sole financial adviser to Symrise on the deal. Lazard and JP Morgan advised the sellers.

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