Nutraceutical International sold for $446 million
The company, known as Nutraceutical for short, announced in a press release today that it will be acquired by an affiliate of private equity firm HGCG LLC. The $446 million deal includes debt to be refinanced. Under the terms of the agreement, Nutraceutical stockholders will receive $41.80 in cash (without interest) for each outstanding share of Nutraceutical common stock they own, which represents a 49% premium to the Company's closing stock price on May 19, 2017, the last full trading day before today's announcement, and a 15.6% premium to the Company's all-time high closing stock price.
Over the years Nutraceuctial, which is based in Park City, UT, has pursued an aggressive acquisition strategy mostly in the form of smaller deals and now manufacturers dietary supplements, personal care product and foods and pet products under brand names such as Solaray, Nature’s Life, Natural Balance and Organix South. The company says it manufacturers more than 7,500 SKUs, about 1,000 of which are sold internationally. The company also owns and operates health food stores under the names Fresh Vitamins, Granola's, Nature's Discount and Warehouse Vitamins.
Move into online sales
The company has now completed more than 65 acquisitions since its founding in 1993, including its most recent purchase of Zhou Nutrition brand in the first week of April. That acquisition, which was valued at about $20 million, accelerated the company’s entrance into internet sales, which was already a key 2016 internal investment initiative. Zhou sells all of its 25 SKUs on its own website and through other online portals.
"We are pleased to announce this transaction, which delivers significant value to our stockholders, many of whom have been with us since our initial IPO in 1998," said Bill Gay, chairman and CEO of Nutraceutical. "HGGC's expertise in formulating strategic growth plans for middle-market companies will be a great platform for the future of Nutraceutical. We expect that the combination of HGGC's strategic insights and the deep industry experience and knowledge of our management team will help us continue to build and grow."
The company now enters into a 60-day “go shop” period in which competing offers will be solicited. The deal is also subject to the customary closing conditions, including shareholder approval. Assuming no better offer arises, the HGCG deal is expected to close in the second half of 2017.
Dietary supplements remain investment target
The acquisition is yet another reminder of the attractiveness of the dietary supplement realm for private equity firms. This is the first deal in the dietary supplement industry for HGCG, whose portfolio prior to this transaction was valued at $4.6 billion. Last year, Swander Pace Capital acquired probiotic brand Florajen and online supplement retailer Swanson Health Products. In 2014 InterHealth was acquired by a private equity firm and that entity subsequently snapped up Next Pharmaceuticals in 2015. And also in 2014 Canada’s largest supplement manufacturer, Jamieson Labs, was sold to a US private equity firm for $300 million. A plan to auction off Jamieson for as much as $1 billion fell through last year.
