In a US$5.75 billion deal that solidifies Nestlé as a powerhouse in the nutritional supplement industry, the Switzerland-based food giant on Friday announced an agreement to acquire several brands of The Bountiful Company, including Nature’s Bounty.
KKR, a global investment firm, is selling to Nestlé Nature's Bounty, Solgar, Osteo Bi-Flex and Puritan’s Pride. Those Bountiful brands generated $1.87 billion in the 12 months ending March 31, with EBITDA (earnings before interest, taxes, depreciation and amortization) of 18.3%, according to Nestlé.
Nestlé expects the deal to close in the second half of the year, subject to regulatory approvals and other typical closing conditions.
"Vitamins and supplements are a key part of our business and have contributed to strong growth acceleration," Nestlé Health Science CEO Greg Behar said in an April 30 press release. "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, specialty retail, e-commerce and direct-to-consumer in the U.S., while offering significant opportunities for geographic growth."
Nestlé said it will integrate the brands “into Nestlé Health Science, creating a global leader in vitamins, minerals and nutritional supplements.” Nestlé Health Science already owns the following vitamins, minerals and supplements brands: Garden of Life, Vital Proteins, Pure Encapsulations, Wobenzym, Douglas Laboratories, Persona Nutrition, Genestra, Orthica, Minami, AOV and Klean Athlete.
The acquisition excludes Bountiful Company's sports and active nutrition brands—Pure Protein, Body Fortress and MET-Rx—as well as Dr. Organic and the Canadian over-the-counter (OTC) business.
KKR in 2017 acquired a majority interest in The Bountiful Company from The Carlyle Group. Carlyle Partners V and Carlyle Europe Partners III funds kept a minority stake in the nutrition company and are participating in the sale alongside KKR.
“Since KKR’s investment, The Bountiful Company has transformed into a leading, fast growth, pure-play nutrition platform through significant investments in talent, brand building, R&D, ecommerce and manufacturing capabilities,” KKR Managing Director Felix Gernburd said in a news release.
Through the acquisition, Nestlé can build a “leading position” in the “fragmented category” for vitamins, minerals and supplements, which “has delivered the highest and most consistent growth in consumer healthcare over the past 10 years,” J.P. Morgan analyst Celine Pannuti stated in an April 30 equity research note.
“We are excited about the opportunity to harness the scale in this category on a global basis as well as online, … where we see significant opportunities from self-medication, personalized online health and subscription models,” she wrote.
Nestlé’s acquisition of Bountiful's brands “makes strategic sense for Nestlé as it helps to (a) increase scale and market leadership, complementing Nestlé’s existing Garden of Life business, (b) leverage synergies across research and development within the existing Nestlé Health Science (NHSc) portfolio, and (c) is consistent with management’s M&A strategy, which focuses on complementary, high-growth and margin accretive acquisitions with ecommerce capabilities,” according to a May 3 equity research note from Guggenheim Securities.
Through the acquisition, Nestlé will gain deeper access to the food, drug and mass (FDM) and direct-to-consumer (D2C) channels, where the company has a limited presence today, Guggenheim Securities analysts said. Sixty six percent of Bountiful's sales are in the FMD channel, and 25% of sales are in the D2C/ecommerce channel, they added.