Drinks ingredients supplier Treatt has agreed to a £156m takeover by Natara Global in the latest consolidation within the fragmented ingredients market.
Natara, a global producer of aroma ingredients owned by PE firm Exponent since 2023, said the deal will bring together two complementary businesses with diverse product portfolios and geographies.
The combined entity will be able to make the most of Treatt’s “state-of-the-art facilities” to capitalise on opportunities that each company could not address alone, it added.
Treatt has come under immense pressure from investors this year after twice downgrading its profit guidance. Its share price was down more than 60% since the start of January before today’s news boosted the stock.
The company’s sales are plummeting amid competitive pressures and falling consumer confidence in North America. High citrus oil prices are also leading drinks makers to reformulate products to mitigate costs.
Natara is offering 260p in cash for each Treatt share, a 16% premium to Friday’s closing share price. Treatt’s share price is up 18% so far this morning following the announcement.
Natara believes Treatt is at “a critical inflection point”, the company said in a statement, arguing the required investment to restore performance could be more effectively achieved under private ownership.
This would allow “the business the flexibility to execute its strategy away from the uncertainty and ongoing costs associated with public markets”.
Treatt chairman Vijay Thakrar said: “Treatt has many opportunities for growth ahead. While we have a clear strategy to capture these growth opportunities, a combination with Natara would provide the investment and scale that will enable us to do this faster, more extensively, and with lower execution risk than we could achieve on a standalone basis.
“It would bring together two highly complementary businesses and expand our reach and product offering significantly - positioning Treatt, our people, and our customers for long-term success.
“The board believes that the proposed offer from Exponent and Natara is fair and reasonable, and an opportunity for Treatt’s shareholders to realise their entire investment with certain value in cash. Accordingly, the board unanimously recommends the offer.”
The acquisition is expected to complete later this year, with shareholders of Treatt set to vote on whether to approve the takeover at an upcoming general meeting.
The deal is part of a wave of consolidation in the ingredients sector that has included Tate & Lyle’s £1.4bn acquisition of CP Kelco in November and ADM’s buyout of Fuerst Day Lawson in January 2024.
Yet despite the consolidation, the sector remains fragmented with the top four players holding about 20% of the market, according to Mordor Intelligence.
Tom Cunningham and Alex Masters from investment bank Lincoln International therefore predict further M&A is expected over coming years as large corporates continue to sharpen their portfolios, and private equity-backed platforms continue to consolidate.
“Industry challenges have shone a light on the dynamism of the speciality ingredients sector and its key role in the value chain, creating value both for clients as well as investors,” they wrote in The Grocer in June.
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