Croda Buys Iberchem for $973 Million in Fragrance Expansion

(Bloomberg) -- Croda International Plc agreed to buy Iberchem for 820 million euros ($973 million) as Europe’s largest cosmetic-ingredients maker expands into the hotly contested market of fragrances.

The maker of sunblock chemicals and pharmaceutical additives said Wednesday it plans to raise 600 million pounds ($798 million) in equity to help pay for the purchase of the asset from private equity firm Eurazeo SE. Bloomberg earlier reported Croda was lining up funding for a deal and that Iberchem was a target.

In buying Murcia, Spain-based Iberchem, Croda is turning the tables on fragrance makers that have been expanding on its turf. Switzerland’s Givaudan SA is among the scent suppliers that are prioritizing expansion in the skin-care actives market as they look to offer global consumer-goods companies the full spectrum of ingredients.

Croda Chief Executive Officer Steve Foots is now showing the same ambition to build a complete offering for the myriad of fast-moving boutique brands that are breaking into personal-care markets. Iberchem generates 80% of its sales from fragrances used in personal- and home-care products such as detergents. Food, drug and oral care account for the remainder of the 174 million euros in revenue last year, with 34 million euros in Ebitda generated.

Croda jumped as much as 3.2% in London trading as investors shrugged off the dilution impact from a share sale to focus on a new growth path. The stock has gained 21% this year, for a market value of almost 8 billion pounds. It got a boost last week after the company announced a contract with Pfizer Inc. to supply novel excipients for a Covid-19 vaccine candidate.

License to Buy

“Croda’s performance and share price indicate that it has a license to execute M&A and this entrance into flavors and fragrances, albeit small, is exciting,” Thomas Wrigglesworth, an analyst at Citigroup Inc., said in a note.

Lazard Ltd. advised Croda, with Freshfields Bruckhaus Deringer LLP providing legal help. Morgan Stanley and HSBC Holdings Plc are coordinating the planned share sale and serving as joint advisers. BNP Paribas SA advised Eurazeo on the sale.

Croda was the under-bidder “by a long way” in the sale process for Iberchem, CEO Foots said. Management of the target company hold a 30% stake and were influential in Eurazeo’s decision to go with Croda.

Leverage will increase to two times its earnings before interest, taxes, depreciation and amortization after the deal.

Croda’s largest acquisition to date was its 2006 purchase of Imperial Chemical Industries Plc’s Uniqema unit for 410 million pounds, according to data compiled by Bloomberg. That deal provided Croda with a launchpad to more than a decade of growth in higher-margin specialty chemicals.

The company hired experienced chemicals dealmaker Anthony Fitzpatrick in 2014 to lead corporate development. Croda went on to make a multitude of bolt-on acquisitions focused on technology to make complex ingredients used in health-care products and top-end moisturizers. Attempts at another transformational deal proved unsuccessful in 2018 when its pursuit of Ashland Global Holdings Inc. ended in a disagreement over valuation.

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