Nestlé is to acquire “core” brands of US-based vitamins and supplements maker The Bountiful Company for US$5.75bn after revealing earlier in the week it was in talks with private-equity firm KKR to purchase all or parts of the business.
The deal includes the Bountiful brands Nature’s Bounty, Solgar, Osteo Bi-Flex and Puritan’s Pride, described as “high-growth” lines by Nestlé in a statement this morning (30 April), while the world’s largest food company will also acquire the US firm’s private-label business in the country.
Bountiful’s sports and active-nutrition brands Pure Protein, Body Fortress and MET-Rx, as well as Dr. Organic and the company’s Canadian over-the-counter business, are not included in the transaction because they do not “complement the Nestlé Health Science portfolio”, Nestlé said.
The acquired brands will sit beside Atrium Innovations in the Health Science portfolio, a Canada-based vitamins and supplement group the KitKat maker purchased in 2017.
Nestlé said the deal with KKR is expected to close in the second half of this year, subject to regulatory approvals.
Greg Behar, the CEO of Nestlé Health Science, said: "This acquisition complements our existing health and nutrition portfolio in terms of brands and channels. It will establish Nestlé Health Science as the industry leader in mass retail, speciality retail, e-commerce and direct-to-consumer in the US, while offering significant opportunities for geographic growth. Vitamins and supplements are a key part of our business and have contributed to strong growth acceleration."
Based in Long Island New York, Bountiful has been headed up by CEO Paul Sturman since 2017. The company was originally founded as Nature's Bounty in 1971 before it was rebranded by KKR in partnership with Sturman in 2017.
Bountiful has manufacturing, packing, distribution, and warehouse facilities across the US and in Canada and the UK, according to its website. It also "maintains offices overseas" in China, Spain, South Africa and New Zealand.
A spokesperson for Nestlé clarified the acquisition includes eight manufacturing facilities in the US and that KKR remains the majority owner in Bountiful, while The Carlyle Group retains a "small ownership".
KKR confirmed in a separate statement that it acquired a majority interest in Bountiful in 2017 from Carlyle, which retains a minority stake and is "participating in the sale alongside KKR".
"We're pleased to have partnered with the management team and KKR in this chapter of The Bountiful Company's growth and are excited to see the business continue its journey with Nestlé," said Jay Sammons, the head of Carlyle's global consumer, media and retail team.
Meanwhile, Pascal Boll, an analyst at US-based investment bank and financial services firm Stifel, wrote in a research note this morning: "We believe the transaction makes strategic sense and positions Nestlé strongly in a solidly-growing market, which combined with market-share gains should lead to above Nestlé's average organic growth. The transaction multiples are reasonable."
Nestlé said the acquired brands generated net sales in the year ended 31 March of $1.87bn and an EBITDA margin of 18.3%. "This EBITDA will be negatively affected by one-off integration costs, which will be slightly dilutive to Nestlé's underlying trading operating profit margin in 2021." It added: "The margin is expected to increase above the Nestlé group average once synergies are fully implemented by 2024."
Sturman, who is also president of Bountiful, said: "Today's announcement from Nestlé Health Science recognises the transformation of The Bountiful Company over the past three-plus years, as well as the collective value and capability of the organisation. We're incredibly proud of the trusted brands we've built and are confident that they will be strong assets for Nestlé."
Nate Taylor, a partner and co-head of the Americas at KKR, added: "Paul and the entire The Bountiful Company team have built a global portfolio of brands that are positioned for sustained growth, with a great culture of innovation, accountability and pace of change. We know that The Bountiful Company will add value to Nestlé and continue to enhance the health of the millions of consumers who use their products each and every day."