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Frutarom Industries Ltd., one of the world's 10 largest companies in the field of flavors and natural specialty fine ingredients has announced that it has signed an agreement for the purchase of 60% of the shares of the Thai company The Mighty CO. LTD. (including the activity of Maharaj Food Co. Ltd. and Mighty International Co. Ltd., and hereinafter collectively: “Mighty”) for approximately THB 393 million (approx. US$ 12 million) (not including debt) and at a valuation of THB 655 million (approx. US$ 20 million) (not including debt).

In the framework of the transaction Frutarom will initially acquire 49% of Mighty and, subject to a number of conditions precedent and regulatory approvals in Thailand, will raise its holdings to 60%. The transaction includes a mechanism for future consideration subject to Mighty’s future performance and an option for the purchase of the balance of holdings in Mighty in two stages in periods beginning three years and five years from the date the transaction is completed. The first part of the transaction will be completed in the upcoming weeks and Frutarom estimates that raising its holdings to 60% will be completed within several months. The acquisition will be financed by independent means and through bank debt.

Mighty’s sales turnover in the 12 months ended August 2017 totaled approx. THB 500 million (approx. US$ 15 million) after having registered average annual growth of 12% over the past four years.

Mighty, which was founded in 1989, engages in the development, production and marketing of flavors, including savory taste solutions (the non-sweet spectrum of flavors). The company has a leading position in Thailand’s flavors market where there are very few producers of taste solutions, and is among the most innovative flavors companies in Southeast Asia based on independent R&D. In recent years Mighty has won a number of prizes as an innovative and leading flavors manufacturer in Southeast Asia. The company’s broad portfolio of solutions includes flavors, seasoning blends and marinades as well as specialty functional raw materials for the food and beverage industry with emphasis on the field of convenience foods, snacks, noodles, fish, meats, baked goods, beverages and dairy, and it has a portfolio of unique products and solutions adapted to Asian tastes based on the vast knowledge and experience of its managers. Mighty’s activity also includes unique solutions for producing raw materials for the fields of infant nutrition and elderly nutrition, and Frutarom intends to continue developing this activity in Thailand and in the countries of the region.

Approximately 60% of Mighty’s activity consists of manufacturing taste solutions, with market leadership in the field of savory taste solutions, while 40% is trade activity in specialty raw materials for the food, beverages and nutrition industries.

Mighty has approximately 180 employees, two production sites with excess production capacity, including a new site located in a development zone which enjoys government incentives and has advanced equipment and production capacity allowing for significant expansion potential, and advanced innovative R&D activity with an interesting pipeline of patent protected products and developments in the field of savory flavors.

Mighty has around 160 customers and is one of the few local flavors companies in Southeast Asia that operates at international standards which allows for supplying major international food and beverage customers along with medium-sized and small local customers. About 70% of its activity is in Thailand and the rest is in the growing countries in Southeast Asia and Asia-Pacific, including Indonesia, Malaysia, Singapore, Vietnam, Bangladesh and India, among others.

Thailand, with a population of around 70 million, is Southeast Asia’s second largest economy and the region’s second largest trading economy, and is among the economies recording the world’s largest stride in recent years in terms of reducing the rate of poverty while attaining full employment and negligible unemployment with government encouragement and support in removing trade barriers among other things.

Mighty’s activity is synergetic with Frutarom’s expanding activity in Southeast Asia in the field of flavors which has grown in recent years at a faster rate than the market, and combining the diverse customer bases and broad technology portfolio of Mighty and Frutarom in taste solutions creates many diverse cross-selling opportunities. Frutarom intends to turn Mighty into a center for R&D and production for the countries of the entire region, and to increase and accelerate Mighty’s growing activity in the field of sweet flavors as well based on Frutarom’s capabilities.

The acquisition of Mighty is Frutarom’s second acquisition this year in Southeast Asia after having acquired the Vietnamese flavors producer WFF, and is part of the fulfillment of Frutarom’s strategy to significantly expand its activity in Asia. In this framework Frutarom acquired in 2015 the Indian flavors company Sonarome and the Chinese/Hong Kong taste solutions company Inventive, and in 2016 inaugurated a new modern flavors plant, including an advanced R&D laboratory, in Shanghai, China. Frutarom intends to continue significantly expanding its activity in Asia based both on rapid organic growth and an interesting acquisition pipeline including in additional key regional countries, along with optimal exploitation of the many cross-selling opportunities and taking steps to integrate the procurement, production, R&D and sales and marketing platforms in the countries of the region, the company reported.