Nestle has agreed to acquire Canadian nutritional health products manufacturer Atrium Innovations from a group of investors led by Permira Funds for US$2.3 billion in cash. Nestle notes that the move for the company, whose 2017 sales are expected to reach almost US$700 million, supports Nestle’s pursuit of growth opportunities in consumer healthcare to complement the company's focus on its high-growth food and beverage categories.
The price of purchase is 3.3 times Atrium's 2017 sales. Compared with similar deals, that is less than the 4.76 times that Reckitt Benckiser Group Plc. paid for Mead Johnson, but just above the 3 times that Danone SA paid for WhiteWave, according to Bloomberg data.
It may also be noteworthy that the vast majority of Atrium’s sales come from the US, meaning there is still room for Nestlé to buy businesses elsewhere, such as the vitamins unit being sold by Germany’s Merck, which has a large presence in emerging markets.
Pursuing growth opportunities
Nestlé Health Science already sells nutritional products for people with specific medical conditions and has been a leader when it comes to Nestlé’s ambition to become a “nutrition, health and wellness” company as sales of packaged foods have slowed.
The transaction for Atrium is expected to close in the first quarter of 2018 following the completion of customary approvals and closing conditions. Upon closing, Atrium, with its corporate offices in Quebec, Canada, will become part of Nestlé Health Science. Its existing management team will continue to manage the business, led by Peter Luther, Atrium Innovations President and Chief Executive Officer.
“We value Atrium’s history as a highly successful company and welcome its 1,400 employees to the Nestlé family,” says Greg Behar, Nestlé Health Science Chief Executive Officer. “Their brands are a natural complement to our Consumer Care portfolio, which offers nutritional solutions in the areas of Healthy Aging, Healthy Growing, Gut Health and Obesity Care. Atrium’s portfolio will extend our product range with value-added solutions such as probiotics, plant-based protein nutrition, meal replacements and an extensive multivitamin line, enabling consumers to address their health and wellness goals.”
“Atrium’s established brands are in attractive categories and have the potential for continued strong growth as part of Nestlé through category, channel and geographic expansion,” adds Behar. “It also represents additional offerings in the segment for non-GMO, organic and natural supplements, a fast-growing consumer trend, as well as a new sales channel.”
“Since Atrium was established in 1999, we have been dedicated to providing premium-quality, science-based, professionally recognized products to consumers and healthcare practitioners,” says Luther. “We are very pleased to be joining Nestlé Health Science as we share a common purpose of helping people lead healthier lives by providing good-for-you products made with the highest standards for quality and efficacy. Nestlé will provide Atrium with the resources to accelerate the growth of our brands and reach more people globally.”
The move comes shortly after Mark Schneider was appointed Chief Executive Officer of Nestlé, with some analysts indicating that he may be reshaping the traditional food group.
The Atrium purchase means that Nestlé now has access to supplements such as probiotics, meal replacements and plant-based proteins. It also has access to multivitamins, which are seeing an increase in demand as consumers seek to safeguard their health and reject mainstream brands.
The move seems to fit in with the strategic blueprint that Schneider set out at the end of September. At that time, he pledged to look for opportunities in consumer healthcare outside of the company's core areas of coffee, pet care, infant formula and bottled water.
Schneider’s reputation as an enthusiastic dealmaker has certainly been reinforced by several purchases in his first year in the job. As well as Atrium, he has moved for a smaller artisan coffee group and niche food businesses such as Sweet Earth.
Atrium's largest brand, Garden of Life, is the No 1 brand in the natural supplement industry in the US, according to Nestlé. Garden of Life, headquartered in Palm Beach Gardens, Florida, manufactures certified organic, non-GMO supplements that are sold in more than 14,000 health food stores and online in the US, as well as select markets internationally.
The remainder of the Atrium portfolio includes strong specialty brands like Pure Encapsulations, Wobenzym, Douglas Laboratories, Genestra Brands, Orthica, AOV, Minami, Klean Athlete, Pharmax and Trophic.