Givaudan buys ICI’s fragrances unit for $2.3bn
Givaudan, the world’s biggest flavouring maker, agreed to buy the fragrances unit of Imperial Chemical Industries for £1.2bn ($2.3bn) to become the largest supplier of scents used in perfumes.
The purchase of Quest International, whose clients include Giorgio Armani and Christian Dior, will be financed using debt and the sale of as much as 1bn Swiss francs ($807m) in shares, Vernier, Switzerland-based Givaudan said on Wednesday.
Demand for artificial scents used in perfumes and shampoo is the most profitable segment of the $16bn flavouring industry and has driven Givaudan’s revenue growth this year. The purchase will also expand the company’s presence in markets such as Latin America and generate annual savings of 150m francs, it said.
Givaudan, which makes the fragrance for Yves Saint-Laurent’s (YSL) Opium perfume, has seen its stock adding 17% this year, giving a market value of 7.6bn francs. Perfume ingredients helped boost Givaudan’s first-half profit 28% and adding Quest will almost double its share of the flavours and fragrances market to as much as 30%, chief executive officer Gilles Andrier said in an interview. New York-based International Flavors & Fragrances has 16% of the market, he said.
“We feel very positive about this acquisition because of the strategic fit,” Andrier said in an interview. “It complements our fragrance business.” The transaction is expected to be completed in the first quarter of next year.
Quest had sales of £560m last year, generating profit of £52m. It’s based in the Dutch town of Naarden and employs around 3,400 people globally, with major operations in the US, UK, continental Europe and Asia. Quest had gross assets of £374m at the end of last year.
The sale by ICI marks the latest step in an overhaul designed to cut costs and focus the company on products such as adhesives and Dulux paints.
The bulk of proceeds from the disposal will be used to pay down debt and to cut ICI’s pension deficit by £230m to about £1bn, chief financial officer Alan Brown said on a conference call.
The disposal of Quest follows the sale in September of Uniqema, a maker of fat-based chemical ingredients for skin-care products, to Croda International for £410m.
Still, Brown said he envisages no wholesale breakup of the British company, which plans to make “many and varied” acquisitions and is targeting market leadership in the paints industry. ICI’s biggest competitor is Sherwin-Williams, the largest paint producer in North America.
“Proceeds will allow us to accelerate our investments in our strong coatings, adhesives and other specialty chemicals businesses to deliver higher levels of profitable growth,” ICI CEO John McAdam said in a separate statement.
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