Israeli flavours and ingredients group Frutarom has signed a deal to buy US company Flavours Specialties.

The company, which has activities in Central and South America, is being acquired for US$17.2m.

Frutarom said the agreement determines a future upwards or downwards earn-out mechanism, based on the average EBITDA generated by the US firm during the 24 months ending 31 December 2010, multiplied by 5.5.

In accordance with the earn-out mechanism, the total sum paid by Frutarom could increase up to a maximum of $27m or decrease to $13.15m. 

The upwards earn-out payment will be paid by Frutarom for average EBITDA in excess of $3.1m and the downwards EBITDA will be paid to Frutarom for average EBITDA below $2.7m. 

The acquisition will be financed through bank loans.

Ori Yehudai, president and CEO of Frutarom, said: "This acquisition is an additional step in the implementation of Frutarom's rapid growth strategy and of realising its vision and is an important strategic acquisition that implements our plan to strengthen Frutarom's geographical presence in the flavours field in the American Continent, and mainly in the US."