IFF carve-out of Frutarom Savory likely to attract large sponsors

The New York-headquartered group has appointed JPMorgan and Lazard to oversee an auction of the Austria-based subsidiary, whose offering includes starter cultures, spices, oils and ready-to-cook components, according to the sources.

FSS, which was added to IFF's portfolio as part of its USD 7.1bn (EUR 5.8bn) acquisition of Israeli peer Frutarom in 2018, is expected to be marketed off USD 90m-USD 100m (EUR 85m-EUR 94m) in EBITDA and approximately USD 500m (EUR 474m) in revenue, the sources said.

With preparations for the carveout underway, the process could kick off as early as June, one of the sources added.

IFF's move to sell FSS comes less than a year after it agreed to sell its Microbial Control unit to Lanxess for USD 1.3bn – part of its ongoing strategic portfolio review.

The sources said that IFF is likely to cast a wide net when approaching the market, with large-cap private equity firms – especially those with chemicals experience – expected to dominate the bidder pool, according to one of the sources.

The vendor could also entice the interest of industry players such as McCormick & Company, the same source said, adding that the profile of the Maryland-headquartered food ingredients producer could be used to provide a valuation benchmark. McCormick is valued at 21x forecasted 2022 EBITDA, according to data provided by Fidessa and compiled by Factset.

In the event of a sale, IFF could fetch more than USD 1bn, or 12x-15x EBITDA, for FSS, one of the sources said.

FSS is attached to IFF's Nourish arm, which operates a portfolio of regional subsidiaries in the natural and plant-based food ingredients, flavor compounds and savory solutions spaces.

Representatives for IFF, JPMorgan and Lazard declined to comment. FSS did not respond to requests for comment.

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