KKR exits WILD Flavors in $3bn deal

September 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Archer Daniels Midland Co (ADM) announced in July that it had entered into a definitive agreement to acquire WILD Flavors GmbH in a deal worth approximately $3bn.

The deal will see control of WILD Flavors transferred to ADM from the firm’s previous owners Hans Peter Wild and private equity (PE) giant KKR & Co. The transaction, which is still subject to several regulatory approvals, is expected to be completed by the end of 2014. The transaction, once completed, will be the largest deal in ADM’s 112 year history.

WILD Flavors was founded in Heidelberg in 1931 and has manufacturing sites across Europe, the Middle East, Asia and the Americas. The company currently employs around 2500 people in 23 countries; approximately 400 of those are scientists and applications specialists who man 28 innovation centres worldwide.

KKR acquired an initial stake in the company in 2010 before expanding that stake to around 35 percent. It is believed that KKR has more than trebled its initial investment in WILD by acquiescing to the sale. The firm is a manufacturer of flavourings and ingredients for the global food and beverage industry. Hans-Peter Wild, son of the firm’s founder Rudolf Wild, owns 65 percent of the company’s outstanding shares. WILD Flavors’ largest brand – Capri Sun – will not be included in the transaction. Ownership of the Capri Sun brand will be retained by the Wild family.

KKR and the Wild family began to explore the option of selling the company in March 2014, with the idea of exiting the company via an IPO suggested at one point. However it was decided that a conventional sale would be more beneficial. By agreeing to acquire WILD Flavors, ADM beat rival bids from Japanese firm Ajinmoto Co and Swedish PE group EQT Partners.

According to a joint statement the deal will be an all cash transaction which will see ADM assume net debt of around €100m. ADM will pay more than 16 times WILD’s 2014 estimated earnings before interest, taxation, depreciation and amortisation (EBITDA) of €140m. ADM estimates that the company’s 2015 EBITDA will be in the region of €160m to €165m. ADM is targeting costs savings of approximately €100m by the third year of the deal. In the statement, Johannes Huth, head of KKR’s Europe, Africa and Middle East operations, said: “WILD Flavors represented for KKR the opportunity to partner with an innovative family entrepreneur in developing a high quality, R&D driven, Germany based Mittelstand business. The partnership was tailored to the family ownership and the vision of Dr Wild to develop WILD Flavors into a globally integrated producer of Flavors and Flavor systems. The substantial growth and global expansion of WILD Flavors over these past years helped make the company an attractive and valuable partner for an industry-leading global company like ADM.”

ADM intends to use the acquisition of the WILD Flavors brands to greatly increase the company’s standing internationally. To that end the firm announced in April that it planned to invest more than 60 percent of its capital expenditure in assets located outside of the US. The deal for WILD meets that criterion. “This acquisition expands ADM’s ability to serve customers’ evolving needs today and well into the future,” said ADM chairman and chief executive Patricia Woertz. “Natural Flavor and ingredients is one of the largest and fastest growing consumer trends in both developed and emerging markets, and WILD Flavors is the world’s leading provider of natural Flavor systems to the food and beverage industry.”

Since KKR acquired a stake in WILD four years ago, the company has completed a number of acquisitions. Most notably, the firm purchased several businesses including Cargill’s juice blends division, mint oil maker A.M. Todd and natural extracts maker Alfrebro.

Richard Summerfield