Robertet (3)
A global leader in natural fragrances, flavors and ingredients. Part 3: ownership and capital allocation.
A fiercely independent family-owned business
In September 2019, Firmenich acquired 17% of Robertet’s outstanding shares from the fund First Eagle at an average share price of €683.3. Firmenich indicated they would remain a passive shareholder but were still opened to increase their stake and even gain a controlling ownership. This ouverture was politely but firmly rebutted by Robertet, which would not give them any seat at the board. Firmenich has since increased its ownership in Robertet to 21.58%. A reason possibly explaining Firmenich’s preemptive move is they have lost many bidding wars to either IFF or Givaudan and wanted to make sure this time they were in the driver’s seat. This is also a reminder there are not many (if any) targets of Robertet’s caliber available in the industry.
Another interesting development took place in February 2020 when Givaudan, the global leader in F&F (fragrances and flavors), struck back and announced it had acquired a 4.68% ownership in Robertet. We can only guess they built their stake at an average price of €850- 900 per share.
The fifth Maubert generation has a stake of just under 50% of Maubert S.A., the family holdco which owns 46.99% of Robertet (but 67.56% of its voting rights). The fourth generation (that of the current CEO) only transferred the right of use of its shares but kept the ownership itself. If shares were to be sold, this would require the consent of both generations. The youngest generation is represented by Julien Maubert (see picture below with his father, Philippe).
The succession plan is one of the family’s main objectives. Following the stakes bought by Firmenich and Givaudan, Robertet reacted strongly to make things clear with its employees, clients as well as the shareholders. They reaffirmed their willingness to remain independent, which is not negotiable.
The dividend currently stands at €5.6 per share, i.e. a 0.6% yield with a payout of 24%. It could increase if results improve. Clearly, some family members would like it to be higher although the existing management consider the reinvestment opportunities are potentially more significant and profitable.
Buybacks are not to be ruled out in the future but there is currently no share repurchase program in place and growing the business remains the priority. As an illustration, the company could have been taken private by the Maubert family at some point but they decided to make an acquisition instead.
A historically prudent M&A policy that will likely get more traction to meet ambitious growth targets
Over the years, Robertet has made several small-size easy-to-integrate acquisitions to strengthen its know-how in naturals, expand its geographic footprint and/or access new technologies. Such transactions included Jay Flavors in ‘86 (natural flavors in the US), Charabot (a Grasse-based perfumer) and SAPAD (essential oils and plants from organic agriculture) in ‘07 as well as Hitex in ‘14 (food additives and advanced CO2 extraction techniques). In 2016, its purchase of Bionov reinforced its presence in the food supplement market and more generally in the field of nutrition and health. Its 2 most recent acquisitions, Sirius (2019) and Ecom Food Industries (2021), further strengthened its leading position in organic essential oils/floral waters and specialty natural flavors/extracts, respectively.
Robertet’s management acknowledges it might have to be a little more aggressive on the M&A front, especially in the highly attractive health & beauty space, to meet its goal of doubling sales within the next 10 years (i.e. a 7% CAGR in line with its historical revenue growth) and complement its already high organic growth. As far as CAPEX are concerned, since the bulk of major investments has already been done, they should revert to a lower/maintenance level.
Asia has been a special area of focus in order to take advantage of this market’s favorable dynamics. Robertet’s investments in the region have started paying off with sales up 20% at Robertet Asia in 2020. An entity was recently created in Indonesia while Robertet also took full control of their Indian subsidiary. Charabot is also well-positioned in the region (China, Indonesia and through a partnership in India). Asian entities have become significant contributors in terms of results too: Robertet Asia (Singapore-based ASEAN HQ) and Robertet Beijing had a combined net income above €3.3m in FY ‘20. Robertet Bejing has a larger hard asset capital base while Robertet Asia is a more asset-light manufacturing, R&D and distribution unit serving Southeast Asia.
Next, our final article of this series will deal with Robertet’s most recent performance and valuation.
Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – we hold a position in Robertet at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).