NBTY Buys Rexall Sundown 29316

June 23, 2003

3 Min Read
NBTY Buys Rexall Sundown

NBTY Buys Rexall Sundown

BOHEMIA, N.Y.The guessing game is overRexall Sundown, asupplement manufacturer owned by The Netherlands-based Royal Numico, was sold toNBTY Inc. for $250 million in cash. Industry insiders had speculated NBTY wouldbuy the supplement line, especially after it signed a letter of intent toacquire 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 alsobrings with it Rexalls production facilities and warehouses, as well as 290employees. The transaction is subject to regulatory approvals and is expected tobe finalized in the third quarter of 2003 (3Q03). NBTY did not foresee approvalbeing a problem since, even with this acquisition, NBTYs wholesale side willstill remain an insignificant share of the marketplace, it said in astatement.

Rexall Sundown will play a key role in the further growth of our wholesalebusiness by allowing NBTY to offer a greater number and variety of products,expand manufacturing operations and enhance delivery and service to our growingcustomer 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 companyfocus its attention and resources on its baby food and clinical nutritiondivisions, in addition to the floundering sales of U.S. GNCs.

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

NBTY met with Rexall staff early June 10 but did not have a plan of actionyet for merging with the company. NBTY did not have many answers to questionsraised by this acquisition, including whether staff at both companies wouldremain the same and whether executives would stay or be replaced. Right now,were in the learning curve, not the decision curve, Harvey Kamil, NBTYpresident and chief financial officer, said during the press conference. Rightnow, were strengthening our numbers and increasing our sales. We dont havea 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 thecompanys 3Q03 results are reported. In terms of increasing sales numbers,NBTY reported one cash cow is certainGNC has a contractual obligation to buyproduct 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 parentcompany, Royal Numico, reportedly hired New York-based investment bank GoldmanSachs to hold a formal auction of the vitamin chain. The spokesperson forGoldman Sachs had no comment on the sale and said it is up to a companyinthis case, GNCto announce it is being sold.

The Post speculated Thomas H. Lee Partners, an investment firm thathelped with the 1980s buyout of GNC, is a contender, as is Bain Capital, ownersof Nutraceutical International. But industry sources say the one to watch isJ.W.  Childs, reporter Erica Copulsky wrote. The Boston investmentfirm has several important ties to GNC. Its founding partners, who hail fromThomas 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 chiefexecutives.


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