FTSE 100 chemicals giant Croda International (CRDA) has launched a £600 million placing and a retail offer to help it fund the acquisition of a Spanish flavours and fragrances company.
Shares in Croda gained 2.1% to £62.12 after it said it has agreed to acquire Fragrance Spanish Topco, trading as Iberchem, from private equity company Eurazeo for €820 million.
The company plans to fund the deal via a combination of existing debt facilities and the £600 million equity placing for institutional investors, representing about 8% of its issued share capital.
Retail investors can also take part through PrimaryBid.com. There is a minimum subscription of £250 per investor under the terms of the retail offer.
On completion of the deal, Croda said its leverage is expected to increase to around two times EBITDA, before reducing to around 1.6 times by the end of 2021.
‘ACQUISITION ADDS EXCITING GROWTH’
Croda is looking to expand into the hugely competitive fragrances market at a time when more and more companies in the sector are looking to offer the full range of ingredients to their clients, typically consumer goods multinationals such as Unilever (ULVR).
Iberchem generated approximately 80% of its sales from fragrances for personal care and home care products, areas where it has a similar customer profile to Croda.
‘Our expansion into the fast-growing fragrances and flavours market further increases our exposure to consumer care markets and adds another exciting growth adjacency to Croda’s market-leading position,’ Croda said.
A further 20% of Iberchem’s sales were generated by its Scentium flavours business, principally for food, pharmaceutical and oral care applications.
From 2021, Croda’s consumer care sector would comprise the current personal care business, the home care business unit, which currently sits within performance technologies, and Iberchem, the company said.
FULL-YEAR EXPECTATIONS UNCHANGED
‘Trading in the second half of 2020 to the end of October was in line with expectations and the overall trading outlook for the full year remains unchanged,’ the company said.
Croda shares got a boost last week after it revealed it has won a five-year contract, subject to relevant approvals, with pharmaceutical giant Pfizer to provide novel excipients for its coronavirus vaccine.
