Enzymotec Ltd. (Nasdaq: ENZY) chairman Steve Dubin yesterday published his response to a letter sent to Enzymotec's management last week by Frutarom Industries Ltd. (TASE: FRUT; LSE:FRUT; Bulletin Board: FRUTF) CEO Ori Yehudai. Yehudai's letter demanded that Enzymotec's management "refrain from additional measures liable to affect Enzymotec's value."
The letter hinted that Enzymotec's current $260 million market cap (it has risen by 70% since Frutarom began its takeover effort) did not reflect the company's true value, and that it was by no means certain that Frutarom would file an offer to purchase for Enzymotec at the current share price of $11.50, as Frutarom recently announced that it would.
Yehudai's letter was referring to Enzymotec's report in late August of the purchase of five nutritional products from Union Springs Healthcare for $3.6 million and 200,000 options for Enzymotec shares. Yehudai argued, "This transaction and the willingness to issue more Enzymotec shares highlight the company's weakness in R&D, of which we were previously unaware. This will have a negative influence on Frutarom's willingness to complete the acquisition of Enzymotec."
In his response, Dubin stated, "This transaction was absolutely not a response to Frutarom's measures; it is part of Enzymotec's growth strategy, especially accelerated growth and reinforcement in the company's line of Vaya products. The board of directors will continue to assess business opportunities, and will not halt business development as a result of the current situation.
"Furthermore, Enzymotec had $75 million in cash before the transaction, so the transaction was relatively small for the company. We appreciate Frutarom's interests in Enzymotec, but we also believe that the management team, which has formulated a new strategy for the company, can steer it on the road to growth and success."
Dubin also wrote to Yehudai, "As we have said on a number of past occasions, the Enzymotec board of directors is constantly considering ways of increasing the company's value in the long term, and we welcome any advice or measure likely to help the company achieve this goal. We hope that Frutarom signs a confidentiality agreement, so that we can enter into negotiations likely to produce a strategic agreement, disclose figures we do not wish to reveal to the general public, and help you to make a precise valuation for Enzymotec's value for the purpose of the transaction." In his letter, Dubin says that Enzymotec has hired the services of the Rothschild investment bank in order to assess the options available to it.
Enzymotec develops, manufactures, and markets bioactive raw materials based on lipids (fats) for the food supplement and health industries. Frutarom, which works with raw materials and flavors for the food industry, announced on August 24 that it had obtained a 19.1% holding in Enzymotec shares, and planned to publish in the near future an offer to purchase for the rest of Enzymotec's shares.
Published by Globes [online], Israel Business News - www.globes-online.com - on September 27, 2017
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