Looking to reinforce its position role in developing dietary supplements for the health and nutrition industry, Atrium Innovations, Quebec City, Canada, has acquired Ontario-based Seroyal International for $110 million.

Seroyal commercializes premium dietary supplement brands targeting primarily the healthcare practitioner (HCP) channels in Canada and in the U.S. with annualized consolidated revenues of approximately $40 million. The transaction closed on December 31, 2010.

Seroyal’s product portfolio consists of three main brands: Genestra, Unda and Pharmax. These brands are well known among HCP channels and account for close to 90% of total revenues with Genestra being the core of these HCP brands. Another brand, CoreLab, owned in a joint venture, is a Health Food Store brand currently sold in the U.S. In addition, the company is the exclusive distributor for the Canadian and U.S. markets of Unda, a European homeopathic brand. Revenues derived from the Canadian and U.S. markets account respectively for approximately 65% and 35% of total sales. This acquisition will add quality branded products to complement Atrium’s family of products.

“Seroyal is one of the largest acquisitions in our short history,” said Pierre Fitzgibbon, president and CEO of Atrium. “It will allow Atrium to surpass the important milestone of $100 million in EBITDA. Moreover, it will provide us with a leading position in the North American HCP channel and create a significant presence in Canada when combined with our existing operations. This acquisition adds premium, high margin and complementary brands to Atrium’s family of products. Within our multi-channel strategy, we envision some cross-selling opportunities with these new brands and some operating synergies.

“As an organization, we strongly believe in the leadership role we need to take in the education process for the better understanding of our industry given our science-based approach. From that perspective, Seroyal’s extensive Continuing Education Program with HCPs is a perfect fit. Our intention is to leverage its programs for the benefit of all our customers and brands."

For the past twelve months, Seroyal reported consolidated revenues of approximately $40 million. Under the terms of the acquisition, Atrium acquired Seroyal for a total cash consideration of $110 million and the transaction is subject to no future earn-out payments. The total acquisition price implies a LTM EBITDA ratio of 7.5 times. This acquisition combined with the recently announced acquisition of Minami will be immediately accretive by $0.22 per share on an annualized basis. These acquisitions were financed with available cash and bank facilities.

“Taking into account this acquisition and the recent acquisition of Minami Nutrition, the net debt to pro forma EBITDA ratio stands at 2.6 times, a leverage level we are very comfortable with and in our target range,” said Mario Paradis, Vice President and Chief Financial Officer. “Considering the low capital expenditures and working capital requirement of our businesses, we have the option of dedicating a large portion of cash flow to debt reduction. Alternatively, depending on circumstances, we may dedicate it to other opportunities to enhance shareholder value.”