NBTY Buys Rexall Sundown

NBTY Buys Rexall Sundown

BOHEMIA, N.Y.The guessing game is overRexall Sundown, a supplement manufacturer owned by The Netherlands-based Royal Numico, was sold to NBTY Inc. for $250 million in cash. Industry insiders had speculated NBTY would buy the supplement line, especially after it signed a letter of intent to acquire Royal Numicos European GNCs in February. For the year ended Dec. 31, 2002, Rexall had sales of $455 million.

With this acquisition, NBTY (NASDAQ:NBTY) is now owner of all Rexall brands, including CarbSolutions, MET-Rx and WORLDWIDE Sports Nutrition. The sale also brings with it Rexalls production facilities and warehouses, as well as 290 employees. The transaction is subject to regulatory approvals and is expected to be finalized in the third quarter of 2003 (3Q03). NBTY did not foresee approval being a problem since, even with this acquisition, NBTYs wholesale side will still remain an insignificant share of the marketplace, it said in a statement.

Rexall Sundown will play a key role in the further growth of our wholesale business by allowing NBTY to offer a greater number and variety of products, expand manufacturing operations and enhance delivery and service to our growing customer base, Scott Rudolph, NBTY chairman and chief executive officer (CEO), said in the statement.

According to Jan Bennink, Royal Numico CEO, this sale will help the company focus its attention and resources on its baby food and clinical nutrition divisions, in addition to the floundering sales of U.S. GNCs.

During a June 10 press conference held by NBTY, the company reported it would be assuming certain liabilities with the acquisition of Rexall Sundown, minus those liabilities concerning ephedra, which Royal Numico would be handling. NBTY also was guaranteed a certain amount of working capital with the sale, the sum of which was not disclosed.

NBTY met with Rexall staff early June 10 but did not have a plan of action yet for merging with the company. NBTY did not have many answers to questions raised by this acquisition, including whether staff at both companies would remain the same and whether executives would stay or be replaced. Right now, were in the learning curve, not the decision curve, Harvey Kamil, NBTY president and chief financial officer, said during the press conference. Right now, were strengthening our numbers and increasing our sales. We dont have a plan right now, and were learning what to do and how to do it.

Kamil added NBTY would have more answers in a months time, when the companys 3Q03 results are reported. In terms of increasing sales numbers, NBTY reported one cash cow is certainGNC has a contractual obligation to buy product from Rexall for the next five years.

In other GNC news, according to a May 6 story in The New York Post (www.nypost.com), the supplement chain is being auctioned off to the highest bidder. Its parent company, Royal Numico, reportedly hired New York-based investment bank Goldman Sachs to hold a formal auction of the vitamin chain. The spokesperson for Goldman Sachs had no comment on the sale and said it is up to a companyin this case, GNCto announce it is being sold.

The Post speculated Thomas H. Lee Partners, an investment firm that helped with the 1980s buyout of GNC, is a contender, as is Bain Capital, owners of Nutraceutical International. But industry sources say the one to watch is J.W.  Childs, reporter Erica Copulsky wrote. The Boston investment firm has several important ties to GNC. Its founding partners, who hail from Thomas H. Lee, helped the buyout shop take the company private. And two of J.W. Childs partners, Jerry Horn and William Watts, are former GNC chief executives.

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