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Frutarom Industries Ltd.

Frutarom completes acquisition of IFF's fruit preparations business in Germany and Switzerland

Tel Aviv (ots)

Continues to implement rapid growth strategy
One week after reporting a nineteenth consecutive
quarter of growth and improved results, Frutarom Industries Ltd.
(TASE:  FRUT) today announced the completion of its acquisition of
the fruit preparations business in Germany and Switzerland of
International Flavors & Fragrances, Inc. ("IFF") (NYSE:  IFF), which
was initially announced in May this year. The acquired fruit
preparations businesses, include activities conducted at the modern
plants in Emmerich, Germany and Reinach, Switzerland, as well as
related inventory and intellectual property. IFF's fruit preparations
business in Europe recorded revenues of US$ 90 million in 2003; the
businesses in Germany and Switzerland comprise 70% of the European
fruit preparations business. IFF is engaged in a consultation process
with the employee works council in France regarding the proposed
purchase by Frutarom of the fruit preparations business in France.
The fruit preparations business develops and produces unique
compounds of fruit and other natural ingredients used as natural
flavor materials in a wide range of food products such as dairy,
bakery, etc.
The purchase price of the business acquired in Germany and
Switzerland is EUR 30 million (US$ 36.5 million). Certain liabilities
will be deducted from this amount.
The purchase agreement also provides an earn out mechanism based
on the results of the acquired business in 2005 and 2006, which
allows for an increase or decrease of the purchase price of up to an
aggregate of EUR 3.5 million.
"Completing this acquisition is another significant milestone and
brings Frutarom closer to its target:
to achieve a sales turnover of US$ 300 million and become one of
the ten largest, leading multinationals in the flavor and fragrance
industry," said Ori Yehudai, President and Chief Executive Officer of
the Frutarom Group. Yehudai added, "We are very satisfied at having
completed the acquisition of IFF's Swiss and German fruit
preparations businesses. This acquisition continues to fulfill
Frutarom's strategy in recent years to grow rapidly through both fast
organic growth of core activities and strategic acquisitions. The
activity being acquired is expected to contribute significantly to
the Frutarom Group's sales turnover, as well to its profit. Frutarom
intends to use this acquisition to leverage and strengthen its
position as a leading global supplier to the food industry, offering
natural, comprehensive solutions to leading food manufacturers,
including a wide and innovative range of products for the functional
food industry. The acquisition is also expected to strengthen
Frutarom's activity in the field of savory flavors."
This acquisition, coupled with the acquisition of Emil Flachsmann
AG (the Swiss company) last year, will expand the Frutarom Group's
existing customer base and add, many customers who are among the
leading multinational food manufacturers in their field, mainly in
the Western European market.  The fruit preparations acquisition
includes activity in countries where Frutarom has been less active,
such as Spain, Italy and Norway, as well as North Africa. Frutarom
plans to expand the West European activity in the fruit preparations
field to other areas such as North America, East Europe and East
Asia.
Frutarom's human resources are expected to benefit from the
addition of about 190 experienced and efficient personnel at all
levels. The experienced management of the fruit preparations activity
will be integrated with Frutarom's global management, and the
activity's experienced research and development, and sales and
marketing personnel will join Frutarom's global infrastructure.
Yehudai added that, "We believe there are strong synergies between
the new fruit preparations activities and the existing activity of
the Frutarom Group's two divisions (the Flavors Division and the Fine
Ingredients Division) which will support extracting the most value
from the integration of the two businesses.
IFF's consultation process with the French works council regarding
the potential purchase by Frutarom of the French business began when
the letter of intent was signed in May of this year. If this portion
of the transaction proceeds, Frutarom would envisage transferring the
French fruit preparations manufacturing activity to the plants
acquired in Germany and Switzerland in order to reduce costs markedly
while realizing the considerable inherent synergy between the
activity of the three sites, and the synergy that exists between the
acquired activity and Frutarom's current activity. The research,
development, sales and marketing activity that serves the French
market would remain in France, where Frutarom intends to considerably
expand its activity.
Last week, Frutarom announced record results for both the second
quarter and first half of 2004.  Frutarom's sales for the first half
of the year were US$ 88.5 million, growing 46.3% compared with the
first half of 2003.  Operating profit rose 66.0% to reach US$ 12.3
million, and net profit rose sharply by 90.6% to reach US$ 9.3
million.  Net margin also rose to reach 10.5%.
Background on the Company
Frutarom is a multinational company with significant production
and development centers on three continents, which markets its
product in 85 countries worldwide.  Frutarom's products are intended
for the food, beverage, flavor, fragrance, pharmaceutical,
nutraceutical, functional food, food additive and cosmetic
industries.
Frutarom operates through two Divisions:
  • The Flavors Division, which develops, produces and markets flavors, and seasoning compounds.
  • The Fine Ingredients Division, which develops, produces and markets raw materials intended for the production of these same flavors and fragrances, as well as plant extracts and natural products, including medicinal extracts.
Frutarom is also active in several innovative activities,
including through its ArtChem activity, which develops, produces and
markets raw materials in the peptide field that are intended for the
pharmaceutical industry producing through biotechnological methods
Frutarom's products are produced at its plants in the United
States, the United Kingdom, Switzerland, Israel, Denmark, China and
Turkey.  The Company's international marketing organization includes
branches in Israel, the United States, the United Kingdom,
Switzerland, Germany, Denmark, France, Hungary, Romania, Russia,
Ukraine, Kazakhstan, Belarus, Turkey, Brazil, Mexico, China, Japan,
Hong Kong and India.  Frutarom also works through local agents and
distributors worldwide. Frutarom employs about 800 people worldwide.
For further information, please visit our website:
www.frutarom.com

Contact:

Mr Ori Yehudai
President and Chief Executive Officer
Phone +972/4/846'24'01 or 02
Fax +972/4/872'2517
Mobile +972/54/239'233
E-Mail: oyehudai@frutarom.com

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