By Lynda Kiernan
Rock Capital Partners affiliate One Rock has agreed to acquire specialty ingredients producer Innophos for $32 per share, or $932 million.
The deal will be financed through a combination of equity financing provided by affiliates of One Rock, along with committed debt financing from several financial institutions.
Reports surfaced in September that the New Jersey-based maker of essential ingredients for the food and beverage, nutrition and health, and industrial industries had been exploring options for the company, including a possible sale, even though it had undertaken a strategy of achieving growth itself through acquisitions as recently as 2017. In that year, Innophos had spent $153 million across two deals to acquire Novel Ingredients, and NutraGenesis, according to Food Dive.
“After careful consideration and a thorough review of our strategic alternatives, including an outreach program to multiple potential financial and strategic partners over several months, the Board determined that a sale to One Rock is in the best interest of all of our stakeholders,” said Kim Ann Mink, chairman, president and CEO, Innophos.
This definitive agreement includes a 30-day “go-shop” period, during which Innophos, along with its legal and financial advisors, will solicit alternative offers, however there are no guarantees that this process will gin up any superior deals, and expectations are that the transaction will close in the first quarter of 2020.
“We remain confident that our transformational strategy is the right path forward for Innophos; however, executing on this strategy in an increasingly volatile macroeconomic and complex financial environment as a small-cap public company remains challenging and could take longer than initially expected,” said Mink.
“While we believe our long-term goals are achievable, we believe that the offer from One Rock is in the best interest of our stockholders as it will deliver immediate and certain value. We believe this transaction represents a winning proposition for all of our stakeholders, including our employees and customers.”
The flavors and ingredients space has been humming with M&A activity in recent years. Part of the pressure on the industry is coming from global commodities giants vying to reposition themselves beyond commodities, up the production chain to gain a foothold in higher margin businesses, while other companies and investors seek to capitalize upon consumer demands for flavorful, but healthy foods.
Last year alone saw Givaudan acquire and delist Naturex, a leader in the development of natural ingredients and solutions for the food and beverage, health, and beauty sectors, and International Flavors & Fragrances acquire Frutarom Industries in a massive $7.1 billion deal.
In 2016 VMG Partners partnered with TarraVia for the development of algae-based food and ingredients, and that same year, Highland Partners acquired speciality ingredient supplier Fuerst Day Lawson. The following year, Goldman Sachs invested $30 million for a minority stake in bakery products ingredient maker Sun-in; Paine Schwartz made an undisclosed invested in Lyons Magnus Inc.; and Ginkgo Bioworks-based Motif raised $27.5 million in August for the development of animal-free ingredients.
This deal for Innophos serves the company too, as it takes the business private, removing pressure from shareholders, and freeing up capital that can be redeployed into the operation.
“The company has a strong foundation and a transformative growth strategy,” said Tony W. Lee, managing partner, One Rock. “In drawing upon One Rock’s extensive experience, part of our goal is to maximize Innophos’ growth potential by continuing to expand its presence in high-growth food, health and nutrition markets, while further strengthening and optimizing its cash-generative core business. We look forward to working with Innophos to accomplish these goals and position the Company for continued success.”
– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.