HerbalEGram: Volume 7, Number 8, August 2010

Major Nutritional Supplement Company NBTY to be Purchased by Carlyle Group

On July 15, NBTY Inc. (Ronkonkoma, NY), a leading manufacturer and marketer of nutritional supplements, agreed to be acquired by the global alternative asset manager The Carlyle Group (Washington, DC) in a transaction valued at $3.8 billion.¹ News reports have hailed this as the biggest private equity deal thus far in 2010.^2,3

NBTY manufactures and sells thousands of products, including those marketed under the brands Nature’s Bounty, Vitamin World, Holland & Barrett, Rexall, Solgar, Sundown, and Ester C.¹ According to an article published online by The Wall Street Journal, roughly 60% of NBTY’s revenue comes from sales of its products to retailers such as Wal-Mart and Target.³ NBTY products are also sold in health food stores, over the Internet, and through other means. NBTY operates retail stores in various countries, including about 440 Vitamin World stores in the United States and 537 Holland & Barrett stores in Europe. The company employs approximately 14,000 people worldwide, and its 2009 total revenue was $2.6 billion.³

Carlyle agreed to buy NBTY for $55 per share in cash, representing a premium of approximately 57% over NBTY’s average closing share price during the 30 trading days preceding the deal.^1,3

Other buyout firms had expressed interest in purchasing NBTY.² Those companies are able to make counter-bids, and NBTY is permitted to solicit alternative proposals, as the company’s deal with Carlyle includes a “go-shop” provision of 35 days.^1,2

Completion of the transaction with Carlyle is subject to customary conditions to closing, including approval of NBTY stockholders and regulatory approvals.¹ The board of directors of NBTY unanimously approved the merger agreement and has recommended that NBTY’s stockholders adopt the agreement. According to a press release from NBTY, the company expects the transaction to close by the end of 2010.

In the NBTY press release, NBTY Chairman and Chief Executive Officer Scott Rudolph is quoted as saying, “This transaction delivers exceptional value to our shareholders. For our wholesale and retail customers, our commitment to quality and innovation will continue to be our focus. We will leverage Carlyle’s global resources and consumer sector knowledge to further drive the company’s global growth.”¹

According to Sandra Horbach, Carlyle managing director and head of the consumer and retail sector team, “NBTY is an outstanding business with well-established brands, a proven vertically integrated multi-channel/multi-geography strategy, and strong, long-standing customer relationships. We are impressed with the business that has been built under the leadership of Scott Rudolph and are excited to work with him and the senior management team to drive continued growth.”¹

A news report published through Reuters noted that the purchase price of Carlyle’s deal is made up of $2.4 billion debt financing.² NBTY had outstanding debt equaling approximately $476.5 million.

“This is probably a positive development for the entire dietary supplement industry,” said Mark Blumenthal, founder and executive director of the American Botanical Council. “A major investor like Carlyle has most likely exercised a significant degree of due diligence before purchasing a huge company like NBTY,” he added, “and Carlyle has obviously concluded that the dietary supplement sector will continue to experience considerable growth over the next 5 years or even longer.”

“In addition,” he stated, “Carlyle will probably provide additional financial, public relations, and other resources to assist NBTY and the entire supplement industry if they perceive potential legislative and/or regulatory actions which may threaten the industry. Carlyle must be clearly aware that there have been problems in some sectors of the dietary supplement industry. The fact that they’ve made this strategic move suggests that they’re prepared to support and defend their investment.”

─Courtney Cavaliere

References

1.     NBTY agrees to be acquired by the Carlyle Group for $55.00 per share in cash; transaction valued at $3.8 billion; NTBY is a leading nutritional supplement company [press release]. Ronkonkoma, NY: NBTY; July 15, 2010.

2.     Davies M, Sharma S. Carlyle strikes $3.8 billion deal for NBTY. Reuters. July 15, 2010. Available at: http://www.reuters.com/article/idUSTRE66E0OS20100715. Accessed July 19, 2010.

3.     Cimilluca D, Lattman P. Carlyle to buy vitamin maker NBTY for $3.8 billion. Wall Street Journal. July 15, 2010. Available at: http://online.wsj.com/article/SB10001424052748704682604575368581342381648.html. Accessed July 19, 2010.