NBTY puts $230 million up for Leiner Health Products

NBTY entered an Asset Purchase Agreement on May 30 with the Securities and Exchange Commission (SEC) for "the purchase of substantially all of the assets of Leiner Health Products, Inc. for $230 million plus assumption of certain liabilities."

NBTY's product line includes about 22,000 products and the company had revenues of over $2 billion in 2007, according to their annual report, so adding Leiner's 225 supplement will not make a huge splash.

NBTY was contacted for comment but did not reply before publication.

However, an industry insider, who preferred not to be named, told NutraIngredients-USA.com: "While this is not a huge expansion in product line for NBTY, economically adding a $600M dollar business like Leiner for only $230 M would be substantial, and a bargain even if for only the dietary supplements part of the business."

As per Leiner's FY2007 results, net sales were over $735 million.

On the flip side, the company filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code in Delaware on March 11, 2008 in order to continue its operations and enhance the value of its business.

Not a done deal According to the SEC asset purchase agreement, "the agreement is subject to higher or better offers that may be submitted by competing bidders in connection with a process conducted under the supervision of the bankruptcy court presiding over Leiner's chapter 11 bankruptcy case.

"If a higher or better offer is submitted, an auction will be conducted on June 9, 2008, in which case the terms of the agreement may change."

"If no higher or better offer is submitted by a competing bidder, the purchase transaction contemplated by the Agreement is expected to close no later than September, 2008."

Our insider stated that the acquisition would be inline with NBTY's acquisition strategy, which has seen 30 companies snapped up since 1986.

"Their strategy is to merge/acquire companies that complement or extend their existing product lines, increase their market presence, expand their distribution channels, and are compatible with their business philosophy, and Leiner certainly meets many of those criteria," said the insider.

Industry implications The acquisition, if successful, would have knock-on effects to ingredients suppliers, said our insider.

"Both firms are vertically integrated and compete amongst themselves and a few others in many of the same markets, especially as contract manufacturers for chain retail outfits in the US.

"Thus competition in those channels will ramp up, and the acquisition should allow for some distribution synergies which will provide some cost efficiency which may ultimately be good for the consumer in terms of pricing especially with the current economic downturn," they speculated.

No broad changes would be expected for pricing "across the board," except for suppliers who sell to both firms.

In this instance some discounting of prices may occur in order to fulfill the larger orders that would come from the NBTY/Leiner combination.