Frutarom Buys Swiss Food Extracts Firm

Frutarom, a maker of aromas and food extracts, is about to raise $15 million from Israeli institutional investors. The share offering will help reduce the company's debt profile and the fundraising is due in the coming weeks, based on Frutarom's first quarter 2003 financial reports.

CEO Ori Yehudai yesterday confirmed that the company has started moves to raise financing. "As we said in the past, the funds are for a substantial acquisition."

Frutarom yesterday announced it has signed a deal to buy 100 percent of a Swiss company, Emil Flachsmann, for $20 million. Flachsmann, like Frutarom, makes flavor and scent extracts for the foodstuffs market, plus raw materials for the natural medicines market.

Frutarom paid out $16 million at the signing, and will pay another $1.2 million in each of the next three years. Flachsmann has 27 million Swiss francs ($21 million) in shareholder equity, making the deal at equity value.

According to Yehudai, the privately-held Flachsmann has $4 million in cash and a variety of real estate assets like apartments in Zurich that Frutarom can sell off this year. Yehudai estimated consideration for the assets at $8-10 million. Some of that is apparently earmarked to reduce Flachsmann's debt burden.

Flachsmann, founded in 1935, employs 180 people and posted 2002 revenues of 40.1 million Swiss francs ($31 million). Frutarom, which has 650 workers, didn't report if Flachsmann turned a profit.