CAPE TOWN - Going organic can come with a high price tag. Just ask Givaudan SA.
The Swiss flavors and fragrance company agreed Monday to buy Naturex for about 1.3 billion euros ($1.6 billion), or 135 euros a share. That’s 42 percent above where the supplier of natural plant extracts closed in Paris trading on Friday. The deal values the Avignon, France-based company at 20 to 22 times earnings, according to Vontobel analyst Jean-Philippe Bertschy.
“The move makes strategic sense for sure, as Givaudan is securing a leading position in naturals,” Bertschy said. “That move has however a price, which seems very high for that type of transaction.”
Chief Executive Officer Gilles Andrier is having to swallow the cost of Naturex to bolster Givaudan’s footprint in one of the fastest-growing segments in the personal-care and food industries, as consumers increasingly look to avoid artificial coloring and flavors. Valuations placed on flavor-and-fragrance companies have soared as more chemical companies are drawn to the high-margin market. Givaudan’s largest purchase for a decade will bring it extracts from green tea to the recently discovered superfood derived from the leaves of the Moringa tree.
Naturex jumped as much as 43 percent to 135.40 euros in Paris, the biggest gain ever for the company, which has been publicly traded since 1996. Shares of Givaudan were up 2 percent to 2,137 francs as of 12:12 p.m. in Zurich.