International Flavors & Fragrances (IFF) has agreed to buy Frutarom in a cash and stock acquisition valued at $7.1 billion, including debt. The combined company will have 2018 revenues of around $5.3 billion and will be, claims IFF, a global leader in natural taste, scent and nutrition. The boards of both companies have unanimously approved the deal.

The transaction is the latest in the fast-consolidating food flavoring sector, following Givaudan’s proposed acquisition of Naturex for $1.6 billion that was announced in March.

“Frutarom has an extremely attractive product portfolio, including broad expertise in naturals and diverse adjacencies with capabilities beyond our core taste and scent businesses. It also has significant exposure to complementary and fast-growing small- and mid-sized customers,” said Andreas Fibig, IFF’s chairman and CEO. About 70% of Frutarom’s sales are to small- and mid-sized companies.

Israeli-based Frutarom produces flavors, savory solutions and natural ingredients with manufacturing plants and development centers on six continents. It is primarily focused on natural products, which account for more than 75% of its sales. Frutarom is expecting sales of more than $1.6 billion in 2018 and has targeted $2.25 billion in sales by 2020.

IFF said Frutarom’s portfolio creates opportunities to expand into attractive and fast-growing categories, such as natural colors, enzymes, antioxidants and health ingredients.

The transaction is expected to complete in six to nine months and remains subject to approval by Frutarom shareholders, as well as regulatory approval and the usual closing conditions. IFF has entered into an agreement with affiliates of ICC Industries, Frutarom’s largest shareholder with a 36% stake, under which it will vote in favor of the deal.

Upon closure, Frutarom’s president and CEO, Ori Yehudai, will serve as strategic advisor. IFF will remain headquartered in New York City and will maintain a presence in Israel. It will also be listed on both the New York and Tel Aviv Stock Exchanges.

The companies expect to realize approximately $145 million of run-rate cost savings by the third full year after closing, with around 25% achieved in the first full year. These savings are anticipated to come from procurement, footprint optimization and streamlining overhead expenses. Cross-selling opportunities and integrated solutions are also expected to provide revenue synergies.

IFF intends to finance the cash portion of the transaction through a combination of existing cash, new debt and approximately $2.2 billion in new equity.