Lifeway Foods, Inc., the leading producer in the US of the cultured dairy beverage known as kefir, has announced that it has acquired Helios Nutrition Limited, its biggest competitor in the kefir market, for US$8m.

The purchase price comprises $2.5m in cash, $4.2m in a debt note to be paid off quarterly over four years, and $1.3m of Lifeway's treasury shares, which will be equivalent to approximately 101,000 shares.

In addition to its position as the second largest kefir producer behind Lifeway, Helios is the leading producer of organic kefir. Lifeway said the acquisition would strengthen its presence in the rapidly growing market for organic dairy products, provide a steady supply of organic milk through Helios' organic dairy subsidiary and provide cost efficiencies.

"The major catalyst behind this acquisition is the growing demand for organic dairy products," said Lifeway Foods CEO Julie Smolyansky. "We now have the number one share in this market, combining both the top Helios brand and our own very strong organic SKUs."

Smolyansky added that synergies between the two companies would provide natural benefits to shareholders. "We have the same customers including every Whole Foods, Wild Oats and most other natural foods stores, we share the same shelf space, we buy the same raw materials, and we exhibit at the same trade shows," Smolyansky said. "This will give us better purchasing power, increase our ability to effectively market the category, and alleviate competitive pressures from Helios in the natural and organic area of our business."

Helios recorded revenues of approximately $2.7m in the first half of 2006, compared with Lifeway's turnover for the first six months of the year of $12.4m.

Lifeway said the Helios brand would continue to be produced under Lifeway's direction from Helios' existing facility in Sauk Centre, Minnesota. All Helios employees will be retained, and Helios managers will be employed as consultants. However, Lifeway expects to transfer production of the Helios brand to Lifeway's main Illinois facility by the end of 2006.