FNB News - Olam Food Ingredients heats up spices portfolio with acquisition of business

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SPICES

Olam Food Ingredients heats up spices portfolio with acquisition of business

Tuesday, 22 December, 2020, 16 : 00 PM [IST]

Singapore

Olam Food Ingredients, the new operating group created after the reorganisation within Olam International Limited earlier this year, is expanding its spices portfolio to meet the rising demand for bold, authentic flavours with the acquisition of one of the world’s leading suppliers of premium green chillies, jalapeños and enchilada sauces.

Through its subsidiary, Olam Americas, Inc. has agreed to acquire the US-based chillie pepper business of major maker of condiments and sauces, Mizkan America, Inc., for US$108.5 million. This is the first major acquisition for the company after the reorganisation and is in line with its strategy to provide customers with on-trend food products and sustainable, natural, value-added ingredients and solutions.

Based in Deming, New Mexico, CPB is renowned for its high-quality New Mexico green chillies as well as other specialty chillie peppers. These are highly sought after by CPB’s manufacturing, retail, private label and foodservice customers.

Olam Spices CEO, Greg Estep, said, “Formerly known as Border Foods, CPB has been the leading chillie pepper business in the US for nearly 50 years. Combining CPB’s specialty and green chillie range with our red chillie portfolio (which includes paprika, chillie powder and chillie pepper) means we can deliver a wider range of ingredient solutions for customers looking to satisfy the rising demand for authentic Mexican flavors – already the third most popular cuisine in the country.”

“We are further pleased that in operating CPB, Mizkan shares the same focus on sustainable agriculture and quality control, maintaining close farmer relationships and fully integrated supply chains. This also allows Olam Spices to strengthen and expand our chillie sourcing network — notably in Hatch Valley, New Mexico. With the CPB senior executive leadership at the helm, supported by an outstanding group of employees committed to excellence, we will continue to grow the business even further,” added Estep.

The company is the leading supplier of dried garlic, onion and chillie-based ingredients and a global leader for pepper, tropical spices, purées and parsley. With its facility in Las Cruces, New Mexico, it is the largest organic chillie grower and processor in the US, with full traceability from seed to delivery. It is one of OIL’s five leading food ingredient businesses, which along with Cocoa, Coffee, Nuts and Dairy, have come together under the OFI banner to co-create exciting category applications and solutions for its customers and their consumers.

OFI CEO, A. Shekhar, said, “This is a fitting first acquisition for OFI, as CPB fulfils OFI’s vision to help its customers meet consumer preferences for health, nutrition, natural and authentic ethnic flavors, as well as their increasing demands for understanding the provenance and environmental impact of their food choices.”

“CPB’s chillie operations are second-to-none, with a strong heritage, steady financial performance and leading shares for all its products. Further, CPB supplies grocery and retail channels that offer increasing co-manufacturing opportunities in the US and Asia for many of our other products. The addition of CPB’s range of premium green chillies will also broaden and strengthen OFI’s portfolio in plant-based solutions, which continue to gain popularity among consumers. For example, working with OFI’s innovation team we can produce a nut-based cheese that has a jalapeño flavor kick,” added Shekhar.

The CPB operations in Deming are less than 60-miles from the company’s red chillie manufacturing facility in Las Cruces, New Mexico. The close proximity will enable an effective combination of established green and red chillie market capabilities, and allow for even stronger manufacturing and product development, coupled with taste and flavour innovation. It also supports deeper grower relationships in the region, particularly with those growing specialty varieties.

Key financial information relating to the acquisition

Olam Americas, Inc will acquire CPB for a total consideration of US$108.5 million, including an estimated net working capital of US$55.0 million, subject to net working capital adjustment at closing.

The consideration was arrived at via a closed bidding process. The acquisition will be funded by a combination of the company’s internal accruals and existing debt facilities.

The transaction is subject to US antitrust regulatory approval and customary closing conditions which are expected to complete in January 2021.

This acquisition is not expected to have a material impact on the earnings per share or net tangible assets per share of OIL for the financial year ending December 31, 2020 or 2021.

Crowell and Moring LLP provided legal representation to the company in the transaction. Lazard Middle Market served as exclusive financial advisor to Mizkan on the sale of its chillie pepper business, and Locke Lord, LLP served as its legal advisor.