Swiss flavours and fragrances maker Givaudan said on Wednesday it intends to buy rival Quest International for around SFr2.8 billion ($2.25 billion).
Givaudan, the world's largest maker of scents for fine fragrances and consumer products, said it expected to save SFr150 million from synergies resulting from the deal.
The Swiss company said it had signed an agreement with the British-based Imperial Chemical Industries (ICI) to acquire its fragrances and flavour business, Quest International.
"Quest will extend Givaudan's leadership position in all strategic segments of the fragrance and flavour industry," said Givaudan in a statement.
It said it expected savings to be realised after three years. The acquisition will be financed by debt and the issuance of up to SFr1 billion in equity.
The company added that the deal was fully in line with its strategy to focus on developing markets and capture market segments.
It will also accelerate future growth, especially in the important markets of Asia Pacific, Latin America, Eastern Europe and Africa and the Middle East, said Givaudan.
Quest, which is based in the Netherlands, is one of the leading players in the flavour and fragrance market and has a turnover of around SFr1.3 billion. It employs around 3,400 people.
"Quest has regained momentum over the last three years thanks to the talent and commitment of its people. Thus, we are very excited to have this unique opportunity of creating an unrivalled industry leader, building on the strength, momentum and common values of both companies," commented Gilles Andrier, Chief Executive Officer of Givaudan.
The transaction is subject to regulatory approval, which the company hopes will take place during the first quarter of 2007.
"It is a big deal and gives the company a number one position in fragrances, a strategic goal," said anaylst Jon Cox from Kepler Equities in Zurich. "It is also strong in fine fragrances, the fastest growing part of the business."
"However, the deal does not look particularly cheap and appears to price in all of the savings, which will not be fully in until 2010."
In February this year Givaudan announced that its net profit for 2005 had risen by 21 per cent to SFr406 million.
The Geneva-based company said it expected the good results to continue into 2006.
swissinfo with agencies
Givaudan maintains that innovation is the key driver of success. The company aims to be number one in every strategic business to which it is committed.
In 2005 Givaudan fragrances introduced another four new proprietary molecules, developed at its basic research centre in Dübendorf near Zurich.
To reinforce the company's research programme, a new fragrance research laboratory was opened in Shanghai.
Léon Givaudan founded the company in 1898, but it can trace roots back to the French Revolution.
The Roche pharmaceutical company of Basel acquired Givaudan in 1963.
Givaudan was spun off from Roche in June 2000 and is now an independent company, traded on the Swiss Stock Exchange.
In 2002 the company acquired Nestlé's flavour business FIS.