26th Feb 2007 07:01
Treatt PLC26 February 2007 TET.L TREATT PLC ("Treatt") Announces Entry into Organic and Fair Trade Markets Via Acquisition of 50% of Earthoil Treatt plc, one of the world's leading independent ingredients suppliers to theflavour and fragrance industries, is pleased to announce its entry into theorganic and cosmetics markets through the acquisition of 50% of the issued sharecapitals of Earthoil Plantations Limited and Earthoil Kenya Proprietary EPZLimited (together known as "Earthoil"). Earthoil manufactures and suppliesorganically certified and ethically traded essential oils and vegetable oils,mainly for the cosmetics industry. The organic market represents a new area forTreatt with high growth potential. The total consideration for the acquisitionis £2.55 million, to be satisfied by a mix of cash, loan notes and ordinaryshares. Additionally, Treatt has the option to acquire the remaining 50% of theissued share capital of Earthoil from 2012. About Earthoil Established in 2001 and with its headquarters in Lichfield, Staffordshire,Earthoil is a specialist in its field, growing, manufacturing, sourcing andtrading high quality, organically certified essential oils and vegetables oils(also known as "nut" or "seed" oils) as well as other natural extracts. AllEarthoil's organic products are certified by the Soil Association and otherbodies approved by IFOAM, (the International Federation of Organic AgricultureMovements), the worldwide body for organic agriculture. Earthoil both grows its own products in plantations in southern Africa and has anetwork of well-established relationships with organic farmer groups throughoutthe world from whom it purchases products at fair and sustainable prices.Earthoil is therefore able to offer a broad range of organic essential oils andvegetable oils, including: tea tree oil, peppermint oil, lemon oil, apricotkernel oil, sweet almond oil, rosehip oil, cocoa butter and papaya seed oil. Ithas operating facilities in both the UK and Kenya, with its manufacturing baselocated just outside Nairobi within an Export Processing Zone, which offersfavourable trading terms, including certain tax exemptions. Earthoil has established a strong, reputable brand name and distributes tocustomers requiring 100% organic products in the UK, Europe, the US, Australiaand Asia. Customers include The Body Shop, Aveda and Neal's Yard Remedies.Currently, its products are principally used by the cosmetics industry. Financial Information on Earthoil The total gross assets of Earthoil as at 31 December 2006 were £1.1 million(unaudited). Both Earthoil companies were approximately break-even for thefinancial year ended 31 December 2006. The acquisition should be earningsneutral for Treatt in the current financial year and is expected to be earningsenhancing in the next financial year to 30 September 2008. Growth Opportunity The Directors of Treatt believe that the organic and fair trade markets offersubstantial growth opportunities in the cosmetics industry as well as in theflavour and fragrance industry. There is considerable and growing demand ininternational markets for organic and ethically traded raw materials for use infood and health & beauty-related products. In Europe, where the organic market has been growing fastest, consumers spent€20.7 billion in 2004 on organic food and beverages, with UK consumers spending€2.3 billion on organic food*. Spend on natural and organic cosmetics in Europeis expected to have surpassed €1 billion for the first time in 2006**. Growth inorganic retail sales across the EU is expected to average 8% per annum***. Inthe US, in 2005, the organic market was worth an estimated $14.6 billion, withforecast growth of 10-15% per annum until 2010****. The US natural and organicpersonal care market (skin care, hair care and cosmetics) is projected to growfrom $5 billion in 2004 to $8 billion by 2009, an increase of 58%*****. By investing in Earthoil at this stage in its development, Treatt willimmediately take a strategic position in the supply of organic essential oils toits existing customer base in the flavour and fragrance industries. Earthoil'sexpertise in the manufacture and supply of vegetable oils will provide a new andmuch sought after complementary addition to Treatt's existing and extensiveproduct range. Treatt will be able to work with Earthoil to develop Treatt's ownrange of essential oil, natural isolate and Treattarome(TM) ("From the NamedFood") natural distillate products for the 100% organic food and health & beautymarkets where it does not currently have a significant market presence. In addition, Treatt will be able to add significantly to Earthoil's growthpotential both in terms of its financial backing and also as a result of itsmany years' experience in the manufacture and sale of its products into over 90countries worldwide through an extensive global network of agents. Treatt willalso be able to combine effectively its procurement expertise with that ofEarthoil's in order to obtain increased supply of organic and ethically tradedproducts to service the large potential market. Management The existing management team at Earthoil, Campbell Walter, Sales and MarketingDirector, Wayne Barratt, Director of Global Operations, and Tony Silvester,Finance Director, will remain in the business and continue to operate and manageEarthoil. On completion of the 50% acquisition, three Directors representingTreatt will join these three Directors on the Board of Earthoil. Each EarthoilDirector has signed a service contract with a three year initial term, with arolling six month notice period expiring any time on or after conclusion of theinitial term. Details on the consideration The total consideration for the acquisition of 50% of Earthoil is £2.55 million,comprising £1.2375 million in cash, £0.675 million in Consideration Loan Notesand £0.6375 million satisfied through the issue of 188,945 Treatt OrdinaryShares at a price of 337.4 pence. From 2012, Treatt also has the option to acquire (the "Call Option") theremaining 50% of Earthoil. In addition to this, the existing Earthoilshareholders will have the option to oblige Treatt to buy (the "Put Option"),the remaining 50% of Earthoil shares (which will continue to be held by theexisting shareholders) at the "Option Price". Exercise of either option issubject to shareholder approval. The existing Earthoil shareholders will not beable to enforce the Put Option unless it has met a certain level of pre-taxprofit. The Option Price will be 50% of eleven times the average pre-tax profit (forboth Earthoil companies combined) of the two audited financial years ended 31December prior to exercising the option. Application has been made to the UK Listing Authority and to the London StockExchange for admission to the Official List for the listing of the 188,945 newTreatt ordinary shares. These shares will rank pari passu with the existingordinary shares in issue. It is expected that admission will become effective on1 March 2007. In addition, Treatt is subscribing £1.35 million for Earthoil Loan Notes,repayable from 2009 onwards. Treatt is also subscribing £25,000 for 50,000 newordinary shares in Earthoil Plantations Limited. Completion of the acquisitionof Earthoil and the subscriptions for Earthoil loan notes and shares isconditional on admission to the Official List of the 188,945 new ordinary sharesin Treatt which is expected to take place on Thursday, 1 March 2007. Edward Dawnay, Chairman of Treatt plc, commented, "This is an exciting new development for the Group, taking us into the organicand fair trade markets and in particular, the cosmetics sector, which we do notcurrently supply. There is a large and increasing demand for organic ingredients from both thefood and health & beauty sectors and we believe Earthoil offers an excellentstrategic fit with Treatt's existing businesses in the UK, US and China. Earthoil has built up an excellent reputation within the market and we believethere are significant opportunities working together to create a global marketleader in the supply of organic and fair trade essential and vegetable oilproducts." For further information, please contact: Treatt plc Tel: +44 (0)1284 702500Hugo Bovill, Managing DirectorRichard Hope, Finance Director Investec Tel: +44 (0)20 7597 5000James Grace Biddicks Tel: +44 (0)20 7448 1000Katie Tzouliadis Or visit: www.treatt.com www.earthoil.com Sources: * Source: Organic Europe, Organic Market Information, Datamonitor** Source: cosmeticsdesign.com*** Source: FiBL**** Source: OTA 2006 Manufacturer Survey***** Source: US Market for Natural & Organic Personal Care Products About Treatt plc Treatt is a global supplier of ingredients to the flavour and fragranceindustries. These ingredients are mainly based on essential oils, which aredistilled or blended. Aroma chemicals and a range of Treattarome(TM) naturaldistillates, manufactured from the named food, are also supplied. Typicalproducts including a Treatt ingredient could range from air fresheners,cosmetics, shampoos and soaps to soft drinks, confectionery and basicpharmaceutical products. Treatt is a world leader in the supply of essentialoils for these uses. There are hundreds of different essential oils extracted from many differentorganic materials. Some examples of common oils are peppermint, lime, lavender,orange and eucalyptus. Essential oils have been used as flavour, fragrance andcosmetic ingredients for centuries. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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