Global trends and transactions in today’s food flavor industry

SPOT ON | FOOD INGREDIENTS | OCTOBER 2019

FOOD FLAVOR AT A GLANCE (pg.2) “Studying shifts in society and consumer behavior A brief overview of the food flavor industry today which looks at key features including growth is key for companies that want to be successful. projection, customers and end markets, raw materials and the leading players worldwide. Those that can grasp these changes will certainly be able to take advantage of new opportunities SELECTED LISTED COMPANIES AND VALUATION TRENDS (pg.4) offered by the market.” A look at public companies in the food ingredients industry that have consistently outperformed the MICHELE MANETTI FTSE food producers index in recent times. This OAKLINSʼ FOOD INGREDIENTS SPECIALIST trend is expected to continue in the coming years.

M&A ACTIVITY: RECENT PRIVATE TRANSACTIONS (pg.7) A focus on M&A private transactions in the food ingredients sector, with an analysis of the most relevant deals, the countries involved and transaction size ranges.

MARKET OVERVIEW

An ever-growing global population and new customer needs are factors that drive companies in the food & beverage industry towards consolidation. The food ingredient sector is also continuing to move in this direction, with M&A operations remaining buoyant in the first nine months of 2019.

(CONTINUED ON NEXT PAGE) Market overview

FOOD FLAVOR AT A GLANCE

Flavors market share by value (2016) Market size: The food flavors market Input costs: Raw materials typically was valued at US$12.94 billion in 2017; represent approximately 40% of flavor it is projected to grow at a CAGR of 4.8% companiesʼ sales and fall into two 8% to reach US$17.10 billion by 2023. spheres: oil-based raw materials and 3% 19% 5% natural raw materials. While oil-based materials are widely available, the 5% Customer base: Flavors are typically market for natural raw materials has 6% sold to food and beverage producers some peculiarities. This is due mainly to 16% (e.g. Nestlé, Danone, Unilever, PepsiCo, their limited supply (some can only be 8% Mondelez, etc.). End markets include grown in certain regions and can also dairy, bakery, confectionery, savory, suffer from climatic/disease stress) and 8% 12% beverages and pharmaceuticals. the strong demand for such products 10% (as a result of an increased appetite for natural ingredients). As a consequence, Main barriers to entry: These are wide- natural raw material prices can IFF ranging and include R&D critical mass, experience significant volatility. Firmenich inclusion on top customer core lists, Kerry regional dominance, global presence, access to raw materials, increased Small impact on COGS, a big influence Wild Flavors regulatory environment, ability to offer on end consumers: Food flavors Takasago Sensient full product traceability and, to a lesser represent a tiny proportion of the Mane Fils extent, integration with customer ERP end product COGS, usually 0.3–2%. T. Hasegawa systems. However, these ingredients exert Others significant influence on end consumer repurchase decisions.

Source: DB

OAKLINS – Spot On · Food Ingredients · October 2019 2 Market overview

MEGATRENDS AFFECTING THE FLAVORS INDUSTRY

Global megatrends and their main impacts on the flavors industry

A growing …living longer and …in an increasingly customer more responsible interconnected base… lives... world

IMPLICATIONS

ͽͽ Growing population and wealth ͽͽ Aging population ͽͽ Interconnectivity and faster in high-growth markets ͽͽ Being overweight or obese exchange of information ͽͽ Shift from rural to urban areas more widespread ͽͽ Social media transports new ͽͽ Increased disposable incomes ͽͽ Consumers demanding trends faster and wider transparency

IMPACTS ON FLAVORS SECTOR

ͽͽ Rise in spending on processed ͽͽ Demand for tasty products ͽͽ Increased consumer and ready-made foods with with reduced fat, sugar and salt empowerment increase in disposable income content ͽͽ Reduced time-to-market for new ͽͽ Local and regional brands gaining ͽͽ Increased focus on organic, products relevance natural ingredients, natural flavors ͽͽ Increased demand for convenience food

Source: Givaudan annual report

OAKLINS – Spot On · Food Ingredients · October 2019 3 Selected listed companies

Between February and September 2019, the average adjusted capitalization of the 38 companies listed below grew from US$4.849m to US$5.041m. In terms of multiples, in February 2019 the adjusted average of the EV/EBITDA and EV/Sales multiples of food ingredients (FI) listed companies stood at 13.5x and 2.2x respectively, while in September 2019 the EV/EBITDA and EV/ Sales market multiples of FI listed companies (adjusted average) were 13.1x and 2.3x.

Market cap EV/Sales EV/EBITDA Company Country (US$m) (US$m) (US$m)

Givaudan S.A. 25,705 4.8x 25.2x

Associated British Foods plc 22,804 1.1x 8.9x

McCormick & Company, Incorporated 21,232 4.7x 23.3x

Koninklijke DSM N.V. 20,242 2.0x 12.6x

Kerry Group plc 20,234 2.9x 20.4x

Symrise AG 13,091 3.9x 19.4x

International Flavors & Fragrances Inc. 12,831 3.7x 16.9x

Novozymes A/S 12,132 5.8x 16.6x

Solvay S.A. 10,902 1.2x 6.4x

Chr. Hansen Holding A/S 11,061 9.2x 27.1x

Ingredion Incorporated 5,476 1.3x 8.0x

AAK AB (publ.) 4,817 1.7x 18.3x

Tate & Lyle plc 4,318 1.3x 8.1x

Glanbia plc 3,702 1.5x 13.3x

Angel Yeast Co., Ltd. 3,246 3.6x 17.2x

Sensient Technologies Corporation 2,915 2.6x 14.5x

MeiHua Holdings Group Co., Ltd. 1,890 1.3x 6.1x

Corbion N.V. 1,690 1.9x 13.7x

OAKLINS – Spot On · Food Ingredients · October 2019 4 Selected listed companies

Market cap EV/Sales EV/EBITDA Company Country (US$m) (US$m) (US$m)

Robertet S.A. 1,715 2.9x 17.7x

Anhui Jinhe Industrial Co., Ltd. 1,595 2.4x 9.0x

AGRANA Beteiligungs-AG 1,152 0.6x 10.7x

T. Hasegawa Co., Ltd. 806 1.4x 7.9x

Guilin Layn Natural Ingredients Corp. 621 7.4x 51.8x

ChenGuang Biotech Group Co., Ltd. 486 1.2x 14.7x

Takasago International Corporation 504 0.6x 8.5x

Nantong Acetic Acid Chemical Co., Ltd. 501 1.4x 10.2x

Qianjiang Yongan Pharmaceutical Co., Ltd. 371 1.9x 10.6x

Apple Flavor & Fragrance Group Co., Ltd. 367 0.7x 10.7x

S H Kelkar and Company Limited 263 2.0x 11.5x

EnWave Corporation 172 6.0x N/A

Camlin Fine Sciences Ltd. 103 1.2x 13.0x

Changmao Biochemical Engineering Company Limited 54 0.4x 2.3x

Allied Biotech Corporation 55 2.2x 8.2x

Vidhi Specialty Food Ingredients Limited 43 1.4x 6.8x

Rolfes Holdings Limited 30 0.4x 7.6x

Sojaprotein a.d. 22 0.9x N/A

Dynemic Products Limited 19 1.0x 5.5x

Vipul Organics Ltd. 14 1.2x 16.3x

Adj. average (without max or min) 5,041 2.3x 13.1x Average 5,452 2.4x 13.9x Median 1,642 1.6x 12.1x

Source: Capital IQ, Data in US$m as of 09/09/2019

OAKLINS – Spot On · Food Ingredients · October 2019 5 Valuation trends

Oaklins’ food ingredients specialists have created a custom food ingredients index, composed of 38 selected listed companies active in the FI industry (see above section, Selected listed companies). Over the past three years, these FI companies have outperformed traditional food and beverage manufacturers, represented by the FTSE All-World Food Producers index – see the graph below.

In addition, there are two further graphs, one referring to EV/Sales and the other to the EV/EBITDA multiple, which represent trends in the food ingredients sector during the last three years.

Custom Food Ingredients index VS. FTSE All-World Food Producers index

20% 15% 10% 5% 0% -5% -10% -15% -20% 30-Sep-16 31-Jan-17 31-May-17 30-Sep-17 31-Jan-18 31-May-18 30-Sep-18 31-Jan-19 31-May-19 10-Sep-19

FTSE All-World Food Producers Index Value FI Index Value

EV/Sales Multiples – Food Ingredients index

2.50x

2.40x

2.30x FTSE All - World Index - Food FI - Index Dates Producers - Index Value Value 2.20x 30-Sep-16 0,00 0,00 2.10x 31-Oct-16 -3,51 -6,74 30-Nov-16 -6,29 -10,23 2.00x 30-Sep-16 31-Jan-17 31-Dec-1631-May-17 30-Sep-17 31-Jan-18 31-May-18 0,1830-Sep-18 -8,1731-Jan-19 31-May-19 10-Sep-19 31-Jan-17 -9,27 -8,49 28-Feb-17 -1,70 -5,18 EV/EBITDA Multiples – Food31-Mar-17 Ingredients index -1,27 -3,24 30-Apr-17 2,55 1,90 15.00x 31-May-17 7,48 5,03 30-Jun-17 3,88 4,07 14.00x 31-Jul-17 3,94 6,48 31-Aug-17 11,26 9,98 13.00x 30-Sep-17 FI - Inde 7,68 13,27 Dates Value 12.00x 31-Oct-17 10,94 16,24 30-Nov-17!"#$%&#'( )*)+ 4,55 17,11 !'#.-.#'( )*'" 11.00x 31-Dec-17 4,10 18,25 30-Sep-16 31-Jan-17 31-Jan-18!"#/31-May-1701#'( 30-Sep-17)*"" 31-Jan-18 31-May-18 -1,7430-Sep-18 19,4931-Jan-19 31-May-19 10-Sep-19 28-Feb-18!'#2%-#'( )*"3 -6,80 13,82 31-Mar-18!'#456#'7 )*"3 -12,89 12,55 Source: Capital IQ, Data in US$m as of 10/09/2019 30-Apr-18)8#9%:#'7 )*'( -6,28 13,20 OAKLINS – Spot On · Food Ingredients31-May-18!'#;5<#'7 · October 2019)*)" -2,69 12,15 6 30-Jun-18!"#=&<#'7 )*)> -1,64 12,51 31-Jul-18!'#;5?#'7 )*!! -8,08 13,63 31-Aug-18!"#4@6#'7 )*!) -11,01 13,26 30-Sep-18!'#4@A#'7 )*!+ -9,54 14,73 FI - Index Dates31-Oct-18!'#=@B#'7 )*!) Value -10,09 8,64 !"#$%&#'7 )*3) !"#$%&#'(30-Nov-18 ')*'+ -8,94 8,18 !'#.-.#'7 )*33 !'#.-31-Dec-18.#'( '!*'/ -19,23 0,83 !"#/01#'7 )*!) !"#031-Jan-1912#'( ''*3+ -10,05 6,57 !'#2%-#'7 )*!+ !'#4%-#'(28-Feb-19 '+*'3 -12,37 10,36 !'#456#'8 )*!( !'#567#'831-Mar-19 '+*+! -7,39 13,76 )8#9%:#'8 )*)+ +/#30-Apr-199%:#'8 '+*8" -2,00 17,39 !'#;5<#'8 )*)) !'#;631-May-19<#'8 '!*!' -6,75 14,06 !"#=&<#'8 )*)) !"#=&30-Jun-19<#'8 ')*"+ -6,67 17,83 !'#;5?#'8 )*'7 !'#;31-Jul-196>#'8 ')*+) -7,08 15,03 !"#4@6#'8 )*'> !"#5?7#'831-Aug-19 ')*'8 -11,00 10,86 !'#4@A#'8 )*)3 !'#5?@#'810-Sep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activity

During the first nine months of 2019, 54 M&A transactions were closed involving targets active in the food ingredients industry with a 2014–2018 CAGR of 6.9%.

Total food ingredients M&A deals As regards the number of deals completed, Q1–Q3 2019 compared to Q1–Q3 2018 shows a slight decrease: 103 59 closed transactions in 2018 95 90 compared to 54 deals in 2019.

In terms of the targets’ countries, in 2019 68 USA and Canada are the most active 54 locations (39%) followed by Europe (26%), Asia/Pacific (22%), Africa/Middle East (7%) and Latin America and the Caribbean (7%).

2015 2016 2017 2018 2019 (Q1–Q3)

Source: Capital IQ and MergerMarket, transactions related to food ingredients, food additives/ingredients, flavors and fragrances industries

Number of transactions by region (2019)

7% 7% 22% 2019 (Q1– 2015 2016 2017 2018 Q3) 68 95 103 90 54 “Similar to previous years, in the first half of 2019, multiples 39% of the food ingredients sector 26% remained high for both private M&A transactions and listed companies.” Africa/Middle East Asia/Pacific

USA and Canada Latin America and MICHELE MANETTI the Caribbean Europe OAKLINSʼ FOOD INGREDIENTS SPECIALIST

Source: Capital IQ and MergerMarket, transactions related to food ingredients, food additives/ingredients, flavors and fragrances industries

OAKLINS – Spot On · Food Ingredients · October 2019 7

Africa / Middle East 7 United States and Canada 39 Europe 26 Asia / Pacific 22 La?n America and Caribbean 7 M&A activity

A selection of recent private transactions in the sector:

Date Target Bidder Rationale Country Valuation

EV EV/ EV/ EV/ (US$m) Sales EBITDA EBIT

24-Jul-2019 Food ingredients producer 29 1.4x 12.5x 17.9x

UK- and Chile-based natural 28-Jun-2019 N/A N/A N/A N/A colors business

18-Jun-2019 Supplier of baking products N/A N/A N/A N/A

Production and supply of 13-Jun-2019 ingredients and flavorings for N/A N/A N/A N/A food products

Importer and distributor of 3-Jun-2019 678 0.9x N/A 16.2x ingredients and flavors

Provider of flour and semi-finished 31-May-2019 N/A N/A N/A N/A baking products

Manufacturer of fine flavors, 20-May-2019 N/A N/A N/A N/A fragrances and essential oils

Manufacturer of seasonings 30-Apr-2019 N/A N/A N/A N/A and flavors

Production and distribution of food products, including margarine, 9-Apr-2019 N/A N/A N/A N/A vegetable oils and baking ingredients

1-Apr-2019 Natural oils business N/A N/A N/A N/A

25-Mar-2019 Maker of baking ingredients 40 1.8x N/A N/A

Distribution of specialty chemical 11-Mar-2019 N/A N/A N/A N/A and food ingredients

OAKLINS – Spot On · Food Ingredients · October 2019 8 M&A activity

Date Target Bidder Rationale Country Valuation

EV EV/ EV/ EV/ (US$m) Sales EBITDA EBIT

Purification of vegetable oils 20-Feb-2019 and fats for the (biological) food N/A N/A N/A N/A industry

Producer of apple and citrus 4-Feb-2019 373 N/A 13.0x N/A pectin dietary supplements

18-Jan-2019 Yeast facility N/A N/A N/A N/A

Distributor of flavors, shelf life Euroconsultant extenders and other products 17-Jan-2019 N/A N/A N/A N/A Sp. z o predominantly for the meat segment

Production of lecithins and 10-Jan-2019 N/A N/A N/A N/A phospholipids

Source: CapitalIQ and MergerMarket

OAKLINS – Spot On · Food Ingredients · October 2019 9 About Oaklins Deep local roots, global commitment Oaklins brings you opportunities from across the world and we meet you with our expertise wherever you are

OAKLINS OFFERS A OAKLINSʼ FOOD INGREDIENTS SPECIALISTS COMPREHENSIVE RANGE OF SERVICES

ͽͽ M&A advisory (buy-side and sell-side)

ͽͽ Growth equity and equity capital markets advisory

ͽͽ Debt advisory

ͽͽ Corporate finance services AUTHOR MICHELE MANETTI PHILIPPE HERMANT Food ingredients is one of our focus Partner Senior Advisor areas. Combining comprehensive Milan, Italy Paris, France sector knowledge with global T: +39 335350 866 T: +33 1 43 12 32 12 execution has led Oaklins to become one of the most experienced M&A advisors in the food ingredients sector, with a large network of relevant market players worldwide. This results in the best possible merger, acquisition and divestment opportunities for food ingredients companies.

If mergers, acquisitions or divestitures of businesses or business units SVEN-AKE LEWIN OSCAR VAN LEEUWEN Partner Director are part of your strategy, we would Stockholm, Sweden Amsterdam, Netherlands welcome the opportunity to exchange T: +46 8 459 82 40 T: +31 20 416 1303 ideas with you.

Oaklins is the world’s most experienced mid-market M&A advisor, with 800 professionals globally and dedicated industry teams in 40 countries worldwide. We have closed over 1,500 transactions in the past five years. OAKLINS – Spot On · Food Ingredients · October 2019 10 Oaklins disclaimer

This report is provided for information purposes only. Oaklins and its member firms make no guarantee, representation or warranty of any kind regarding the timeliness, accuracy or completeness of its content. This report is not intended to convey investment advice or solicit investments of any kind whatsoever. No investment decisions should be taken based on the contents and views expressed herein. Oaklins and its member firms shall not be responsible for any loss sustained by any person who relies on this publication.

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