The last month witnessed more financing activity in nutrition. Annie’s Inc. the Napa, CA-based company selling organic macaroni and cheese saw its share price almost double immediately after the company went public. This gave the company a market value of more than $600 million, which is a whopping 50x the trailing 12 months EBITDA.
This was one of the most successful IPOs of the last 12 months and it attracted many favorable remarks from the financial community. Annie’s trades under the whimsical stock symbol BNNY and appears to be more than fully valued at this price. Few industry experts expect the company can maintain such a lofty valuation especially when you compare the fundamentals to a company like Hain Celestial. Nonetheless, a successful exit for the private equity firm that backed Annie’s for so long, and continues to maintain a very significant shareholding, is good news for the natural and organic segment of our industry.
In the supplement space, Schiff Nutrition bought Airborne for $150 million. Following the well-publicized problems that Airborne had with their claim that the product helped prevent colds, GF Capital rescued the business when it was on the verge of bankruptcy. They installed a new management team that quickly revised the claims, and with an injection of capital were able to turn the business around so that it would reach sales of $70 million in 2012.
Supplement sales have held up well throughout the recession and this has not gone unnoticed by the major strategic and financial companies. Carlyle and TPG, two of the largest private equity firms, now own significant stakes in supplement companies. P&G, the global consumer products giant has boosted its presence in the category by buying New Chapter and Pfizer has been building its own supplement business through acquisition. We can expect to see further consolidation as these big companies are seldom content to be the #3 or #4 player in a category they are convinced is strategically important.
Later in 2012 the largest food company in the U.S. will split into two separate companies. Kraft will become a $31 billion global snack food business with the curious name of Mondelez and a $17 billion grocery business focused mainly in the U.S. The Kraft grocery business comprises several slow growing but very profitable brands like Kraft Cheese and Jello. Several shrewd observers of the industry are predicting a wave of consolidation in light of this split.
President Barack Obama signed the JOBS (Jumpstart Our Business Startups) Act into law in early April. Among the many provisions is one that raises the number of investors that private companies can have from 500 to 2000, before they are required to register shares with the Securities & Exchange Commission (SEC). This is designed to facilitate the access to capital for start-up and early stage companies. Crowd funding, which has been known in the arts world for several years, will soon be coming to your favorite supplement company or the next Annie’s!
As I completed this blog, Nestlé announced that it had acquired the nutrition products division of Pfizer for nearly $12 billion. The division has sales of $2.2 billion, mainly coming from infant formula—and 85% of the sales are generated in the emerging markets of Asia and Latin America. The business has an estimated 2012 EBITDA of $600 million, so Nestlé is paying an eye-popping 19.8x earnings to maintain a clear leadership position in the global infant nutrition business and improve its market share in several key markets, particularly China. The premium is thought to be well worth it, especially considering the high growth rate expected in emerging markets as urban development puts more women in the workplace and reduces the amount of time women will exclusively breastfeed their babies.