Welcome to today's conference call and webcast to discuss the merger between International Flavors & Fragrances and Frutarom as well as IFF's First Quarter 2018 Earnings. [Operator Instructions] At this time, I would like to turn the call over to Michael DeVeau, Head of Investor Relations. Please go ahead.

Thank you. Good morning, good afternoon and good evening, everyone. Thank you for joining our call to discuss the combination of IFF and Frutarom as well as IFF's First Quarter 2018 Earnings Results. As a reminder, this call is being recorded and the press release and slide presentation regarding today's news are available on the IR section of IFF and Frutarom's respective websites. Today's presentation will include non-GAAP financial measures, which exclude those items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in our press release that we issued today, and is on our website. I would like to remind everyone that these statements being made -- that all statements being made during the call that relate to future results and events, including the proposed merger, are forward-looking statements that are based on current expectations. Actual results and events could differ materially from those discussed here. Please refer to the information on the disclaimer slides in the presentation as well as the additional information contained in the regulatory filings for both companies. Presenting on the call today will be IFF's Chairman and CEO, Andreas Fibig; Frutarom President and CEO, Ori Yehudai; and IFF Executive Vice President and CFO, Rich O'Leary. With that, I would now like to introduce Andreas.

Thank you, Mike. This is an exciting day for both IFF and Frutarom. I'm going to take you through why we are so excited about the news we have announced today, and then I will cover the transaction terms. Ori will take you through Frutarom's and its history at a high level for those that are not familiar. Finally, we will delve deeper into the compelling strategy and financial rationale for this transaction. Lastly, Rich will conclude with a brief discussion of our strong first quarter earnings. So let's get started. We believe this combination will create a global leader in taste, scent and nutrition. This transaction is a win for both company's shareholders. Among the important benefits we expect to realize by combining with Frutarom, IFF will significantly increase its position in natural solutions. We will also strengthen our exposure to fast-growing small and mid-sized customer accounts, gain new opportunities in attractive and fast-growing adjacencies such as natural colors, enzymes, antioxidants and health ingredients, and enhance our global reach. We will also be able to realize the benefit of strong talent comprising extraordinary employees globally. Overall, we have a tremendous opportunity to accelerate our growth, realize significant synergies and deliver attractive shareholder value. Moving on to the terms of this transaction on Slides 7 and 8. Frutarom's shareholders will receive total considerations of $106.25 per share in a cash and stock transaction. The transaction has an implied enterprise value of approximately $7.1 billion. And the consideration is a mix of 67% cash and 33% stock, which provides shareholders both immediate value and the ability to participate in the compelling upside of the combination. Notably, the transaction has a significant synergy potential. We expect to realize approximately $145 million of run rate cost synergies by the third full year. The…

Thank you, Andreas, and it's a great pleasure for me to participate in this first call, while we are aiming to combine these excellent 2 companies, IFF and Frutarom. I admire IFF since I joined this industry more than 33 years ago, and I'm sure that we'll all, including with my excellent colleagues, will admire the combined company going forward in the right ways. In a way, if you allow me on a personal note, just shortly, I'm closing like 2 wheels or circles right now after these 33 years. I joined the company in '86 with sales at that time $3 million. We were able to grow fast, double our company every 4 years, build a global company with 70,000 products sold to 30,000 customers in more than 160 countries. This is a great power to -- that we will be able to use together in the cross-selling opportunity, while we combine the excellent product portfolio and technology of the 2 companies. Of course, great support from the high technology of IFF that, of course, we didn't have access to before. So we truly build a global company, combining fast internal growth above markets, 70 acquisitions added into the Frutarom portfolio and business over the years that enabled us to jump from $3 million in revenue to $1.6 billion to date, and hopefully more. The second circle that I can see is value creation. Frutarom became a public company about 22 years ago. Market cap was $13 million, 1-3 million. We are closing this circle today, which is only the beginning of the circle for me with a market valuation of over $7 billion. So we were able to give some value creation to our shareholders with a great belief that I already -- always mention. We must find…

Thank you, Ori. Let's go a bit deeper on the compelling strategy and financial rationale. As you can see on the Slide 11, this transaction solidifies IFF as a global leader in taste, scent and nutrition. We are uniting 2 industry-leading, innovative companies with complementary customers and capabilities and a talented and committed workforce. Ori and the entire Frutarom team have done an incredible job innovating and building their natural platform. As a result, we will also become a global leader in this important arena and will be well positioned to meet the evolving needs of our customers and consumers. We will offer our customers a stronger more differentiated portfolio of integrated solutions and capabilities. This will allow us to expand into attractive and fast-growing areas, such as enzymes, antioxidants, health ingredients and natural colors. Our customers will have access to a comprehensive portfolio with more value-added and integrated solutions. With Frutarom, we will significantly increase our exposure to fast-growing small- and mid-sized customers, which dovetails perfectly with our new Tastepoint platform. Slides 12 to 14 outline what the combined company will look like at a very high level. We will be positioned as the leader in natural capabilities, which will extend across our entire platform. Our customers will have access to comprehensive and differentiated integrated solutions with increased focus on naturals and health and wellness. This is consistent with the consumer trends we are all seeing. As an example, through their ALDI partnership Frutarom has developed food supplements, but also cosmetic solutions that can be additive to our active ingredients platform. For flavor, paprika combines the benefit of natural flavor and clean label color. In addition, rosemary extracts are powerful antioxidants offering health benefits to food and beverage solutions. On Slide 13, you can see that the combined company…

Thanks, Andreas. I'd like to now turn your attention to a review of our first quarter 2018 results. We have a few slides here to review. I'm pleased to report that we started off the year very well with robust growth across all of our key financial metrics. Our first quarter sales growth was strong as currency-neutral sales increased 7%, which was comprised of 8% growth in Fragrances and 6% growth in Flavors. Top line trends remain strong in both businesses with new wins, volume and pricing all contributing to growth. In Fragrances, we delivered broad-based growth from all categories and regions. And in Flavors, we achieved growth in all categories and nearly all regions. In terms of currency-neutral adjusted operating profit, our focus on driving greater efficiency throughout our business by our cost and productivity initiatives continue to support overall profitability. When combining this with our strong top line performance, we had strong leverage in the P&L as operating profit and EPS both grew 12% on an adjusted currency-neutral basis. Turning to Slides 22 and 23. Flavors' currency-neutral sales increased 6% with growth coming from all categories led by strong improvements in Savory and Dairy. It should be noted, on a 2-year average basis, growth continues to be strong at approximately 8%. From a regional perspective, 3 of the 4 regions delivered growth led by double-digit increases in both EAME and North America. EAME increased 11% on a currency-neutral basis, led by strong double-digit growth in Africa and the Middle East as well as mid-single digit growth in Europe. Growth was achieved across all categories, led by strong performance in Dairy, Beverage and Savory. North America increased 10%, driven by strong new wins in Beverage and Dairy as well as double-digit growth in Tastepoint. While the impact of the…

Thank you, Rich. Let's summarize. We are very pleased with our strong start to 2018. Sales growth was robust with growth across both business units, that when coupled with cost and productivity initiatives, translated into stronger currency-neutral adjusted operating profit and EPS growth. We are more confident in our outlook for year, as we expect to be towards the upper end of our previously communicated guidance range. On this strong foundation, today's transaction comes from a position of strength. As we discussed, together with Frutarom, we anticipate delivering accelerated growth and offer our customers a stronger, more differentiated portfolio of integrated solutions, allowing us to expand beyond our core taste and scent businesses into nutrition. We will drive differentiation via R&D, balance our customer base by emphasizing fast-growing small and mid-sized customers and maximize our portfolio by expanding into fast-growing and diverse adjacencies. Our partnership will result in value creation for our shareholders and even more opportunities for the talented employees of both companies. We could not be more excited about what the future holds for both of us. Operator, let's open for questions.

[Operator Instructions] Your first question comes from the line of Mark Astrachan of Stifel.

I guess, just thoughts broadly, so the deal gets you bigger in Flavors, how do you think about the sustainability of Flavors' growth to remain ahead of Fragrances longer term? I guess, it has in recent years, so you're obviously expecting it to continue, but I guess I'd love to hear how you think about that. And then sort of related to it, thoughts on the strategic rationale for buying a business that had some overlap of competing within your core business, Flavors and Fragrances, I get they're not completely a competitor, with some smaller customer exposure. But how do you think about going into more traditional F&F versus going into an adjacent category at scale as Enzymotec, something like that? So I guess, thoughts on just overall growth rates would be helpful.

Okay. Yes, absolutely, Mark. So first of all, we would like to see that it's just an overlap on the classic and traditional flavors, but what we see is here a whole range of exciting adjacencies. And you well know, with our Vision 2020, we have started to expand beyond Flavors already and beyond Fragrances actually with the acquisition, for example, of LMC, where we went into active cosmetic ingredients. By the way, we will strengthen with the Frutarom acquisition the active cosmetics business as well, because we have parts of it in it. And if you look at all the different markets, and actually we have one of the slides showing it very well, the adjacencies. The market growth of these adjacencies is a bit higher than in our traditional F&F. And we have some of these areas which was really good profitability as well, so we are basically building beyond the traditional Flavor business. That's the reason why we like to talk in the future about taste and nutrition as the 2 elements or segments where we are in. We actually believe that the deal with Frutarom is very complementary, actually in many regards; in terms of the portfolio and the technologies; in terms of the geographic exposure, because we are filling in some gaps we are having, for example, in Eastern Europe, where Frutarom is just very, very, very strong. So that's helping us a lot. So for me, it's a very natural prolongation of our Vision 2020 strategy and fits exactly into that. That's the reason why Ori and myself saw this combination as something which is just unbeatable, because it fits so well together. So we're a bit stronger on the taste and nutrition side, but we believe that's really good. Rich, do you want to step in?

Yes, I mean, Andreas, and Mark, I mean, for me I think it is very -- it's a great opportunity. It shifts the overall mix when you think about it. It's going to be favorable in terms of accelerating growth for the combined companies. From a business standpoint, the overall -- we know the overall markets on the Flavors side are higher than on the Fragrances side, but both businesses remain very attractive and very profitable. It helps from a category standpoint that Andreas talked about, that we're getting access to and a foundation to build upon some of the faster-growing adjacencies that we've targeted and saw real opportunities for our Vision 2020. And then the access to the faster-growing local and regional customers, all those things are going to be positive for the overall growth profile of the company.

And the good thing on the customer side there is, the overlap is not that big. So it actually helps us for the cross-selling quite tremendously, because we can sell our technology to Frutarom customers and vice versa. So we believe that we'll create a lot of value going forward just cross-selling.

Great. And just following up on the last point. So how confident are you in retaining the customers? I guess, if you can give more of a specific percentage of customer overlap, that would be helpful. And just sort of another broader question related to customers. So your gross margins were a bit better in the quarter than I think most would have expected, certainly us. Have -- has the push back on the pricing which you talked about last fall subsided? And in doing a deal like this, do you think that helps get more scale? And just how do you think about the puts and takes in dealing with your customers on a go-forward basis? Obviously, you're offering them more solutions, but they're all still under pressure on their -- in their earnings algorithm.

So if you look at the customer base, Frutarom is covering around about 30,000 customers, we cover around about 3,000 customers. So there is actually, as I said, not a lot of overlap. We believe that the danger that we are losing important customers is very, very little. We don't think that will happen. The good thing as well on the Frutarom side is because they are standing on so many legs with so many different customers, there is not this big customer, if we lose it, it will put the deal into jeopardy. I think it's actually a very good risk mitigation for all of us that they have such a wide customer base. And we will now go really into the targeting, how we do the cross-selling in the best possible way. On the pricing?

It -- I mean, I think, my first comment I would say, when you look at the categories, I mean, there's not -- they are -- in a lot of ways, Frutarom, their business, where there is overlap from a customer standpoint, so a lot of that's coming in categories that we don't have today. So again, I feel like the risk of overlap is quite low, from a pricing standpoint, but not -- I mean, it's a market environment and we have to manage through that the way we do day in, day out every day, okay?

Your next question comes from the line of Lauren Lieberman of Barclays.

First thing I wanted to ask about was just integration. So my understanding is Frutarom has been very, very active on the M&A front. And so as you're thinking about synergies and integration, I wanted to know, one; how much of the $145 million is sort of inclusive of integration plans that Frutarom was already in the middle of pursuing? And then secondly, if some of those plans kind of get reworked, because now integration may be meaning something different as you're integrating some of those deals into a bigger sort of infrastructure, vis-à-vis IFF. And just kind of visibility on timing of those pieces.

So Lauren, thank you for the question. And indeed, the integration is of utmost importance. First of all, we have started already with Ori and the Frutarom team to identifying what are the areas and that's how we came up with the $145 million. And we are actually very confident that we can achieve that. And we looked during the DD, from our point of -- our vantage point on the integration, and we believe that we have already a good idea and a good plan in place. We will bring up an integration office, which is manned with people from both companies with one of our high-ranking IFF executives to lead this team for the next 1.5 or 2 years to really make it a priority for us. Actually we have even set up a board integration committee, which is led by -- as a Chairman, by Marcello Bottoli to make sure that we have the right focus on it. So I believe we are very well prepared. And then we should not underestimate that what Frutarom has done in the last couple of years is a lot of work on integration already. So we are counting here on a very experienced team, which can support us to bring this all on board.

Yes, I think from my standpoint, Lauren, I mean, we really did start with a clean sheet of paper and said, okay, let's look at the 2 organizations. Where are these opportunities? Whether it's from a technology standpoint, whether it's from a sourcing standpoint, manufacturing footprint, the overhead expenses, and I think we know we feel very good about and confident about our ability to deliver on that and leverage -- as Andreas said, leverage the talent and the expertise on both sides of the business.

Your next question comes from the line of Mike Sison of KeyBanc.

In terms of the accretion potential in year 2, can you maybe talk through what type of growth you expect Frutarom to generate in that year? How much of the synergy would come in year 1 or in year 2? And then maybe frame up the -- I guess, your long-term growth, if you grow EPS organically, add double digits or 10% or something, that would be kind of a strong double-digit mid- to high-teens EPS growth in year 2, is that the way to kind of think about it?

Mike, there's a lot there. I'm not sure I can write that fast. Look, I think from a synergy standpoint, the cost side as we talked about in our previous materials, we think about 25% of the synergies will come in year 1. There will be probably between 70%, 75% in year 2. And then fully in year 3. Year 2 -- year 1, we believe we're basically going to be neutral from a cash EPS standpoint and as we said earlier, double-digit increase and double-digit improvement in cash basis in year 2. From a top line standpoint, there is -- again, this is an attractive business. Frutarom has had a consistent growth trajectory on an organic basis for the last 3 years, growing faster than we have been growing. On top of that there is benefits associated with their M&A program, which has been a crucial part of their business strategy. So I think on an absolute basis, combining organic growth and some of the carryover impacts of their M&A program will have higher growth in year 1, and then the normal growth at the higher end of the range going forward.

Your next question comes from the line of Faiza Alwy of Deutsche Bank.

So I have 2 questions. One is just, can you talk about how much overlap there is in North America specifically? Because I know that's where you've made an effort to target some of the smaller and medium-sized customers? And to the extent there is, sort of how do you plan to run the business together in North America, and then just globally post deal closure? And then my second question is just on, it seems like Frutarom's gross margins and EBITDA margins are a bit lower than yours. Do you see that as an opportunity or do you think that's a function of the categories that they are in versus that you're in?

Faiza, thank you for the question. I'll take the first part and then Rich, the second one. So actually North America -- the overlap is very, very, very small how we see it. But it will fit actually very, very well into our business, in particular with the Tastepoint we have set up here. So we will make now this part of the business super, super strong, and it will help us in our home market actually a great deal. Rich?

Yes. From my standpoint, looking at the margins, I mean, first of all, Frutarom's had a tremendous impressive record of growing the business while expanding margins. It's a very strong business, and we're extremely pleased to have that opportunity to combine the 2 companies. I think some of the opportunities and the differences reflected in the margin is reflected in the synergy opportunities that we already discussed earlier. And other piece of it can be mix related also.

Your next question comes from the line of Adam Samuelson of Goldman Sachs.

I guess, my first question would be just around kind of what pro forma growth margins, capital intensity of the business. And as you think about what the pro forma organic revenue growth would look like for the combined business. I mean, acquisitions post close, I'd imagine would become less kind of eminent strategic priority. And then on the capital intensity portion, what the working capital -- do you see any opportunities in working capital post the deal? I think the cost synergies, which is the cost number and there wasn't any identified cash synergies. And then 1 quick follow-up on the quarter, you exceeded kind of your range on growth on all metrics, but the guidance range was left unchanged. Could you talk about drivers of implied deceleration over the balance of the year?

Okay. So I mean, from a growth perspective I'll give you some comments on the last one now, and directionally we're not going to get into specifics. From a margin potential, I mean, when you look at the 2 businesses, add on the synergies, we feel like we're going to be well positioned to be competitive at the high end of the market in terms of overall EBITDA margins. From a capital intensity standpoint, I think there's opportunities as we combine both organizations to drive improvements on an overall basis in terms of our working capital performance. It's going to help drive the cash flow over the next 5 years to help drive the deleveraging. That's important for our overall strategy. From a CapEx standpoint, I think as we look at the overall position, over time it will come down. Again, we have to work through, some of the integration work will require some one-off CapEx. And then -- so there'll be some -- included in our estimates of the cash flow models over the next couple of years, is some CapEx necessary to drive the synergies from a manufacturing standpoint. But overall, this is a very strong business. Both businesses are extremely profitable. Strong cash generation and that's going to get us where we need to be to grow the business and also deleverage on an accelerated basis. From a earnings standpoint in our guidance, there is an implied difference between first half or Q1 sort of first -- strong start in Q1. As we talked about on the last call; number 1, the second half comps in the last year becomes much, much stronger compared to the first half last year. We feel confident about our ability to get to the higher end of the range from growth, from a sales and operating profit standpoint. As I've talked about on the prior call, there is still a lot movement in the industry in terms of demand, inventory impacts, and so I think we're being appropriately cautious at this point in terms of our guidance for the full year.

Your next question comes from the line of Brett Hundley of Vertical Group.

I just had 2. The first one is a simple one. I was just curious if Frut will continue its M&A strategy during the next few months? I know their pipeline is very full, so I just wanted a comment on that. And then secondly, Andreas, in our opinion, Frut grows the way that it does, because of its, what I'll call a satellite approach and heavy levels of decentralization, so their culture seems very different than yours. And honestly, when we speak to other companies in the industry, many times they say that they don't even know when they're going up against Frutarom in a bid or something like that just because of all their disparate acquisitions over time. So it does seem like you really have your work cut out for you in realizing your synergy target, which is a pretty high target to begin with. Do you feel like you're being aggressive with the time line of synergy realization? And can you just delve back into the confidence that you have in realizing that target and the work that you've done? Because again, I think some of us are just thinking, while Frut has all these different businesses then IFF may potentially have some real work ahead of it?

So let me start with your easy one. From an M&A standpoint, I mean, as I made in the comment earlier, I mean, the M&A part has been an important part of the growth strategy and the vision for Frutarom. It's a key core competency of the Frutarom organization. We want to continue to leverage that and help drive the growth as combined companies. We're confident given the strong cash flow of both businesses and the industry as a whole that we can continue to execute on the M&A platform, while aggressively deleveraging the company.

On the second question, we believe that both companies have an entrepreneurial culture and that is a pretty good alignment. So we don't believe that we have an aggressive time line on the cost synergy realization. So we feel real good about this. And if you think, what we have started now, let's say, a year, 2 years ago with our Tastepoint experiment in the U.S., it basically shows how you can deal with these smaller companies. Remember, we brought David Michael and Ottens and we have combined them into the Tastepoint as an outreach or platform for the more regional, smaller and mid -- or mid-sized customers. I believe that we have already some expertise. And that we also know when you build this platform, for example, how do you basically separate the traditional IFF business with the big customers, but still make sure that companies like Tastepoint and now in the future, the Frutarom subsidiaries will get access to IFF technology. And that's the part of cross-selling which will create a lot of value going forward. And I believe that's a tremendous opportunity.

Your next question comes from the line of John Roberts of UBS.

Could you comment on margins on the 25% of sales that aren't Flavors? I assume trading is below average, and natural colors, enzymes and antioxidants are above average?

Yes, that -- I think that's the right way to think about it. I mean, the trading business is very much almost like a distribution type, so the margins are low, but it's a key value-add service that the Frutarom business provides to its customers.

And then, how do you plan on reporting the non-Flavors part of Frutarom? I think sometimes the way companies report kind of tells us a little about how they'll manage the businesses well. Will you roll it into Flavors like you do with Lucas Meyer in Fragrances? Or will you put it over with the Fragrance Ingredients or how do you plan to handle that?

Yes, what we will do over the next couple of months until the closing is that, we will come up with the right structure for the business going forward, which is -- positions us to capture the value as best as we can. And then we will basically decide on the reporting structure here as well. And you are right, John, there are a couple of ways to go and now we have much more businesses, we have to look how we do it in the best possible way to make sure also that we support the cross-selling.

Your next question comes from the line of Jon Feeney of Consumer Edge.

Andreas, we've talked for a while about -- so one of the first questions I ever came up with, I know it was a good one, was why mergers between the largest flavor and fragrances houses in the world don't really make sense. And I was referring to Givaudan, Symrise and Firmenich, there is discrete capabilities, there is overlapping customers. So what -- are there aspects of this transaction that suffer from that? Like do you -- are there major overlaps where you have -- you commented on the existing customer base, is there something special about Frutarom and IFF's capabilities that make that a lot less of a problem? And -- or if you wouldn't mind, if I could ask you, what makes IF -- certainly a great company, lot of growth for all the reasons you outlined and incredibly are going to -- would accelerate any flavor house's growth. Why IFF as a partner, owner, colleagues going forward?

So let me start with it and then hand it over to Ori. So for us, the great thing about this and why we believe it's the best fit you can find in the industry is that we don't have these major overlaps, either in the customer base, which basically broadens the customer base of the new company and also makes us much, much stronger on the naturals, which is a very great strategic fit for us. So Ori, why IFF?

Many reasons. First is the one is the guy that talked before me, Andreas, that I think in a way just in love with him and decided to go with him even though we had other bidders and other interested parties that were less attractive to Frutarom. But on a more, I would say, serious note, even though the previous one was the truth, I mean, look, there are not -- there aren't too many flavor or specialty farm ingredients that are relevant in this space. Financial investor is not interested -- interesting for Frutarom, because it's not money that we are looking for. I strongly believe, and Andreas correctly said, that here we're really talking about the combination of 2 companies that are operating in different fields in 80% of the cases. If you're talking about Savory Solutions for the processed meat, processed fish, ready meals, Frutarom built over the last 12 years a leadership position in that area and that's not the strength of IFF. So here, this will be completely complementary to IFF, but we will use the excellent capabilities of IFF in flavor creation of specialty savory ingredients. When you go to natural products, again, Frutarom built over the last 10 years an exciting product portfolio, i.e., natural color, natural antioxidants, natural cosmetics ingredients that, of course, will go together with IFF and give them a very nice boost with high-end technology of products coming from ALDI or coming from extracts and other applications. The difference in customer portfolio, 75% of Frutarom customers mid to -- local midsized with a special emphasis on the private label, I believe that was not the focus of IFF, correctly so as a large company. And I'm sure that between Andreas and me and the management, we will know how…

Your next question comes from the line of Gunther Zechmann of Bernstein.

Look, you've spoken a lot about the synergy potential and the margins. Can I just ask at all the returns from the Frutarom acquisition for IFF? You've got this target to and your cost of capital within 3- to 5-year time horizon. I think all, except one acquisition were within that time frame. Where does Frutarom in your projections stands on return on invested capital basis? That's the first one. And the second one, on sales synergies, you've got $145 million in cost synergies by the third full year of acquiring Frutarom. You've spoken a lot of the sales synergies, but can you put some numbers on that? That would be very helpful.

Okay. Let me start with the first one from a return standpoint. Yes, this -- given the size and the transformative nature of this deal, I think we're looking at 2 different ways. One, on a cash basis, again focusing on how strong a business both companies are, we're probably going to -- we're going to -- we project that we're going to get the cost of capital returns between year 5 and year 6 on a cash basis. On a GAAP basis, probably another year later, 1 additional year, so we still feel very good about the return profiles of combining the 2 companies and certainly the long-term value creation that combining the 2 companies provide. From a synergy standpoint, again, we're focused on the cost synergies. We do believe that there's substantial opportunity out there from a cross selling standpoint, but don't -- we're not going to comment specifically on what that value is.

Your next question comes from the line of Fintan Ryan of Berenberg.

Next question, operator?

Your next question comes from the line of Patrick Lambert of Raymond James.

Two questions for me. I think a bit financial related to the transaction. The cost of integration of the businesses, you haven't mentioned it. And questions around the IT systems, any -- anything that you think is going to be a bit challenging in terms of integrating Frutarom to IFF? Linked to that also, again for, I guess, Richard, which is the tax impact. What can you actually deduct, I know it could be a good driver for value if you can deduct a lot of the intangibles there. And finally, I think you answered the overlap of clients, but a very quick one on Q1 results in terms of the 8% Fragrance growth, in particular. How much was pricing versus volume overall for IFF and in Fragrance in particular? And are you a bit more in -- could you a bit more precise your view on the citral disruption and impact in Q2, Q3 and the remainder of the year? Have you got a bit more details on that, a bit more granularity on it?

Maybe I'll take the last question first. So on Q1, as you were saying very strong growth on the Fragrance side, there was not much pricing built in this -- in the first quarter. So it's volume, which is great. On the citral situation, you probably see that the BSF is coming back to manufacturing, so we are basically for the second and third quarter on our plan. And we are actually in a very good position to deliver what our customers' need. And we're optimistically going forward. So that's where we are. And we are in a very good position. Now I hand over to Rich on the financials.

Okay. Thanks, Andreas. Yes, just one quick comment, I mean, on the Fragrance growth, it was predominantly volume and commercial performance, new wins, but there was pricing in there, so it was helpful. In terms of citral, I do think it's going to be heavily in the impact. As Andreas said, we're on target with our previous estimates. We still believe that's appropriate. I think, we'll see the biggest impact in Q2 and Q3, again, depending on what happens from their side. From a cost standpoint, the cost to execute and achieve the synergies, it's roughly 1.3x, it's in the ballpark. It's a combination of cost. As I mentioned earlier, there is some capital in there that we believe is going to be necessary to be spent in order to achieve the synergies. From a financing standpoint, it's still pretty early in the process. I think there are opportunities and we'll structure the deal at -- within the company in order to optimize that from a standpoint, look at where the business operates, where the cash flows are generated. So we still have some opportunities there to work through, but I think we're confident in our ability to help -- to have that drive, the delta to see returns that I talked about earlier, in year 2 on a cash basis. No, I mean -- it's part of what I just said we still have to go through the details and work with the Frutarom team in terms of how to optimize and structure that so it allows us to generate -- get the cash from where it's generated to where we need to do to pay down the debt, and that -- work with the specifics of the tax implications associated with that.

Your next question comes from the line of Fintan Ryan of Berenberg.

I think most of my questions have been answered, but I would just like to get a sense that within the synergy plans or the integration going forward, do you plan on any asset disposals, particularly around some of the trading and marketing operations within Frutarom? And/or within the duration as well, I know Frutarom has acquired majority stakes in a number of entities. Is there any sort of change in control at provision in those deals so that you need to buy out some of the minorities as well taking on just the bulk of Frutarom equity?

No, actually, we are not planning to dispose any of the businesses, at least not big parts. And we go forward with the businesses where Frutarom has entered into agreements and has majority parts of the business. So I think that will be business as usually for Frutarom and for us going forward as well.

Yes. I think, as I mentioned earlier, the trading business is a value-added service that Frutarom management team believes its central in terms of their relationship with the customers. Again, we'll look at potential asset sales, as we work through the integration process, but it's too early to say.

Your next question comes from the line of Patrick Rafaisz of UBS.

From a technical point of view, on the contracts you have, is there a break fee in case the transaction doesn't happen? And can you elaborate a bit on what happens to -- or with the other interested party that was mentioned to be involved? Why was that an inferior solution? And lastly, you talked a lot about the complementarity of the business and very little overlaps. And so does that mean that you do not foresee any antitrust-related issues in any of the key markets in this transaction?

So let me start with the last piece. We certainly have to work with the regulatory authorities on the antitrust, but in our initial assessment, we believe it will be positive and benign, so we don't expect any extra hurdles here. And then, I hand over to...

Yes, from a -- there is included in the sales purchase agreement a break-up fee. It's standard and it's consistent with industry standards.

And on the other interested party, I think Ori gave the reason why he believes that IFF is the best partner in the industry.

Your next question comes from the line of Sipke Moes of Kempen Capital Management.

I have one question. I heard somebody referring to that he was not that good at mathematics, but I'm now beginning to do doubt myself. I'm also wondering if you could give a pro forma leverage for the deal because I saw somewhere $3.7 billion, but I'm not exactly sure how you arrived at that specific number.

Thank you for the question. Rich?

Yes, it's $3.7 billion on a simple basis in terms of just looking at net debt over the EBITDA on a run-rate basis. And then, we expect, as I said, to get -- delever quickly over the next 18 to 24 months and probably get down to less than 2.5x over that period.

At this time, there are no further questions. I'll now return the call to Andreas for any additional or closing remarks.

Well, it's an exciting day for Frutarom and for IFF. We're making really good progress, and I would like to thank all of you as well for participating in the call. I think it worked out very well and the 2 of us believe it's a real strong combination, and it's more than 1 plus 1 is 3 or 4. I think going forward, it will be a great future for both companies. Thank you.

Thank you. That does conclude today's conference call. You may now disconnect your lines, and have a wonderful day.