Nestle SA chief executive Mark Schneider has made his biggest acquisition yet, agreeing to buy Canadian dietary supplements maker Atrium Innovations for US$2.3 billion in a bid for growth beyond stagnating mainstream food brands.
The world’s biggest food firm is acquiring Westmount, Quebec-based Atrium from an investor group led by Permira Funds, Nestle said in a statement on Tuesday.
The Swiss owner of Nespresso and Lean Cuisine is paying cash for the Garden of Life supplement maker, whose sales are expected to approach US$700 million this year.
Schneider is trying to turn around the Vevey, Switzerland-based company by focusing on niche acquisitions in areas such as healthy eating, hipster coffee, infant nutrition and pet care.
The new chief executive, who joined Nestle from German healthcare company Fresenius SE, is under pressure to revamp the food giant after the weakest nine-month sales since the turn of the century.
The Atrium deal, which includes the assumption of an undisclosed amount of debt, is Nestle’s biggest acquisition in medical nutrition since the company accelerated its push into health in 2006 by spending about US$2.5 billion on businesses from Novartis AG that make food for hospital patients.
“This is a good start,” Zurich, Switzerland-based Kepler Cheuvreux analyst Jon Cox said. “Nestle still has firepower to do all other deals it has been linked with, but I wouldn’t be surprised to see more under-the-radar stuff rather than the big bang.”
The deal, expected to close in the first quarter, would add to earnings growth immediately, Nestle Health Science chief executive Greg Behar said in a telephone call with journalists.
He added that the valuation of the deal is lower than what most assets in the consumer over-the-counter industry are going for.
“It’s a good size and digestible,” Behar said, adding that 80 percent of Atrium’s sales come from the US.
Nestle plans to boost distribution in the US and expand Atrium in other markets, he added.
Investors have speculated Nestle might buy the consumer health units of Pfizer Inc or Merck KGaA, or possibly organic food maker Hain Celestial Group Inc, Cox said.
“We continue to be open, but I’m not going to comment on the other stuff that’s out there,” Behar said.
Nestle has been investing heavily in its health science unit since 2011, trying to develop food-related products to prevent ailments such as obesity, metabolic problems and Alzheimer’s disease.
Behar said in 2015 that Nestle Health Science could eventually achieve sales of 10 billion Swiss francs (US$10.1 billion).
Atrium, founded in 1999, would add probiotics, plant-based protein nutrition, meal replacements and multivitamins to the Swiss company’s portfolio.
The Canadian company, which has 1,400 employees, sells its supplements in health food stores in the US and selected other markets.
Its brands include Wobenzym, Douglas Laboratories, AOV, Genestra Brands, Orthica, Minami, Klean Athlete, Pharmax and Trophic.
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