IFF said the takeover would enable it to offer customers a broader range of products, and allow both firms to make $145m in cost-savings by the end of the third full-year.
By combining with Frutarom, IFF would have “more exposure to fast-growing end-markets and an enhanced platform to deliver sustainable, profitable growth”, the company added.
“This transaction is a big win and a fantastic outcome for shareholders, customers and employees of both companies,” said IFF chairman and chief executive Andreas Fibig.
“Frutarom has an extremely attractive product portfolio, including broad expertise in naturals and diverse adjacencies with capabilities beyond our core taste and scent businesses.
‘Fast-growing small- and mid-sized customers’
“It also has significant exposure to complementary and fast-growing small- and mid-sized customers.”
Israeli firm Frutarom had been on the acquisition trail itself in recent months, purchasing UK-based Flavours & Essences for £14.75m in January.
That deal was dwarfed by its acquisition of fellow Israeli firm Enzymotec in December. Having owned 19% of the company, Frutarom bought the remaining 81% for $210m (£158m).
Further consolidation in the flavourings sector came in March when Swiss giant Givaudan agreed to buy a 40.6% stake in French firm Naturex for €522m (£457m), and launch a cash tender offer for the remaining shares.
The successive takeovers have meant the global flavourings market is now dominated by four companies – IFF, Symrise, Givaudan and Firmenich.
Natural ingredients focus
With a primary focus on natural ingredients, 70% of Frutarom’s sales are made to local and mid-size customers. In all, it sells 70,000 products to 30,000 customers in 150 countries.
It expected sales of $1.6bn in 2018, and had previously announced a target of $2.25bn in sales by 2020.
Under the terms of the agreement, which has been approved by the boards of directors of both companies, Frutarom’s shareholders will receive $71.19 in cash for each Frutarom share and 0.249 of a share of IFF common stock, representing a total value of $106.25 per share.
Ori Yehudai, president and chief executive of Frutarom, will serve as a strategic adviser supporting Fibig. IFF will remain headquartered in New York, but will maintain a presence in Israel.
Yehudai said: “Frutarom has had a fascinating journey of accelerated growth, far above our industry benchmarks through our investment in unique technologies and focus on natural products in the growing world of health and taste.
“The growth potential for the combined company is substantial and our shareholders will continue to enjoy this upside.”