EU Approves Fragrance Purchase by Investment Group

The European Union Commission Tuesday approved the purchase by investment firm EQT Northern Europe Private Equity Funds of two fragrance and flavors companies, Haarmann & Reimer GmbH and Dragoco Gerberding. EQT is paying pharmaceutical giant Bayer AG EUR1.66 billion for H&R, but declined to say how much stock it would exchange for Dragoco.

The acquisitions mark EQT’s entry into the fragrance and flavors industry. EQT said in a statement that the market offers room to grow and isn’t affected by the current economic downturn. EQT plans to merge the former competitors into one company that will then control 11% of the world’s fragrance market. Although EQT’s purchase will see two independent manufacturers become one, analysts hadn’t expected regulators to block the deal. The acquired businesses are complementary and have little overlap in product lines.

“Their combined market share will not exceed 15% for any of the ingredients concerned,” the Commission said in a statement. “Customers for such products – which include the food and beverage industries as well as cosmetics – will not be overly dependent on H&R/Dragoco since they source their suppliers throughout Europe and possibly elsewhere.”

EQT will hold 76% in the combined business, with 22% going to former Dragoco chief executive Horst Otto Gerberding. The remaining 2% will go to Germany’s Nord LB Bank, a Dragoco shareholder.

The new company will benefit from “H&R’s extensive research and development and Dragoco’s creativeness and innovativeness,” Mr. Gerberding said. He will stay on as CEO of the combined firm.