Private equity firm HGGC has reached an agreement to acquire Nutraceutical International Corp. (Nasdaq: NUTR), a maker of vitamins, minerals and supplements (VMS), in a take-private deal valued at $446 million.
“Nutraceutical is an impressive company with a diverse portfolio of brands and thousands of satisfied retail customers, as well as millions of loyal consumers who rely on its products,” states Les Brown, chief operating officer of HGGC. “Nutraceutical is a great example of a successful roll-up strategy carried out with consistency and dedication over the last 25 years. We have long admired their disciplined market approach, which has allowed the company to consistently generate strong financial returns and positive cash flow.”
Nutraceutical, headquartered in Park City, Utah, manufacturers branded nutritional supplements made from “all natural ingredients” for domestic and international health food stores and suppliers. Founded in 1932, the target’s VMS portfolio consists of approximately 7,500 products and 65 brands. Nutraceutical’s portfolio of brands includes: Solaray, Sunny Green, Dynamic Health, Nature's Life, LifeTime, Natural Balance, NaturalCare, Health from the Sun, Zhou Nutrition, Pioneer, and Nutra BioGenesis. In addition to the target’s brands, the company also owns neighborhood food markets operating under the names of The Real Food Company, Thom's Natural Foods, Cornucopia Community Market, Fresh Vitamins and Granola's.
HGGC is a middle-market private equity firm based in Palo Alto, California with more than $4.25 billion in capital commitments. The PE firm was founded in 2007 as Huntsman Gay Global Capital, named after two investors: Jon Huntsman Sr., chairman of chemical maker Huntsman Corp. (NYSE: HUN), and Robert Gay, a leader in the Church of Jesus Christ of Latter-Day Saints. Recently, HGGC acquired the online marketing research company Instantly Inc and insurance claims provider Davies Group. In December 2016, the firm also closed its third fund with aggregate capital commitments of $1.84 billion.
While nutritional supplements have soared in popularity, the practice has not been without controversy. In 2015, New York Attorney General Eric Schneiderman ordered GNC Holdings Inc. (NYSE: GNC), Target Corp. (NYSE: TGT), Wal-Mart Stores Inc. (NYSE: WMT) and Walgreens Inc. (NYSE: WAG) to stop selling store-brand herbal supplements after DNA testing showed that the vast majority of supplements at some stores – a whopping 79 percent – did not contain the key ingredient advertised, or were contaminated with materials not listed on labels. Despite questions about the content of some supplements, many VMS makers have continued to attract buyers.
Middle-market deals involving vitamins, supplements and better-for-you foods have seemingly remained steady as growing populations have become more aware of what they consume. Despite the crackdown on the authenticity of nutritional supplements, some recent VMS acquisitions include: Swander Pace Capital’s purchase of Swanson Health Products’ vitamin portfolio; The Clorox Co.’s (NYSE: CLX) acquisition of probiotics maker Renew Life Holdings Corp.; WhiteWave Foods Co.’s (NYSE: WWAV) $550 million deal to buy Sequel Natural Ltd.; and Helen of Troy’s buying of nutritional supplement group Healthy Directions LLC for $195 million.
The acquisition of Nutraceutical is expected close in the second quarter of 2017. Peter J. Solomon Co. is acting as financial adviser to Nutraceutical, while Paul Weiss Rifkind Wharton & Garrison LLP is serving as counsel. Piper Jaffray & Co. is acting as financial adviser to HGGC and Kirkland & Ellis LLP is working as legal counsel.