Nutraceutical companies give boost to Wall Street IPO and M&A business

Financiers have discovered what the industry knew all along: Economic hard times have not been bad for makers and sellers of wellness products. People are willing to forgo luxuries, even new cars and homes, but not their health. As a result, the supplement industry has weathered the recession much better than automakers and homebuilders. Witness the recent spurt in money-driven deals in the nutraceutical industry:

Vitacost.com Inc. is going public with an offering 11 million shares at $11 to $13 per share. The company will trade on Nasdaq under the symbol VITC. The online retailer and direct marketer of health and wellness products lined up Jefferies & Co. and Oppenheimer to manage the sale. Investment bankers Needham & Co. and Roth Capital Partners are co-managers. How well is Vitacost.com doing? The company said it had about 957,000 active customers as of June 30, up 37 percent from the same time the year before. They made purchases about two to three times per year. Over the last 12 quarters, the average order value ranged from $72 to $77. Vitacost.com had net sales of $143.6 million and net income of $17,407 in the latest quarter.

Quasi-competitor Vitamin Shoppe Inc. has also filed to go public by selling up to $143.75 million of common stock under the symbol VSI on the NYSE.  Underwriters are the well-known J.P.Morgan, Bank of America Merrill Lynch, and Barclays Capital. The company sells more than 8,000 different products at its 425 stores in 37 states and even more items through the Internet and catalogs. Vitamin Shoppe had net sales of $601.5 million in fiscal 2008 versus $436.5 million in fiscal 2005. Retail sales are up over the same time period.

And Herbalife Ltd. (NYSE: HLF) paid $10 million this month for Micelle Laboratories to expand manufacturing capacity. The dealmakers were not announced. Micelle provided contract manufacturing services to Herbalife for 24 years and recently helped develop two Herbalife products, mango-flavored Herbal Aloe Powder and mango-flavored Herbal Aloe Concentrate. None of the 92 full-and part-time workers at Micelle are expected to lose their jobs. Herbalife, a global network marketing company that sells weight-management, nutritional supplements and personal care products, reported smaller profits in the second quarter ended June 30, which management attributed to slower sales and currency fluctuations. Sales quarter over quarter rose 7.7 percent in the United States, 3.2 percent in Mexico and 57.5 percent in China.

So it would seem that nutraceuticals are good for what ails Wall Street: a lack of financing and merger deals. How much busier will the fourth quarter be?

About 

Joel B. Rothman represents clients in intellectual property infringement litigation involving patents, trademarks, copyrights, trade secrets, defamation, trade libel, unfair competition, unfair and deceptive trade practices, and commercial matters. Joel’s litigation practice also includes significant focus on electronic discovery issues such as e-discovery management and motion practice relating to e-discovery.

Joel B. Rothman represents clients in intellectual property infringement litigation involving patents, trademarks, copyrights, trade secrets, defamation, trade libel, unfair competition, unfair and deceptive trade practices, and commercial matters. Joel’s litigation practice also includes significant focus on electronic discovery issues such as e-discovery management and motion practice relating to e-discovery.

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7 Comments

  1. Concerned Citizen said:

    I really..REALLY hope there is a typo here, 143.6 million dollars net sales for vitacost.com to make a palsy 17,000 USD net income? Really??? What an environmental nightmare! Do you know how many UPS packages that is?

  2. Hugo Ottolenghi said:

    Those figures came from one news report. According to a Reuters article about the IPO, “Vitacost.com had sales of $93.2 million in the first six months of 2009, up 35.6 percent from a year earlier, while net income rose nearly tenfold over the same period to $7.2 million.”

  3. steven carassian said:

    Speaking of contract manufacturers…..

    Does anybody know who’s leading the pack for nutraceuticals is So Cal?

    I’ve heard companies like Lienert(are they still around?), Maat Nutritionals, etc

    Ive also heard Adam Nutrition has been making some noise in the industry. Anybody know who they are producing for? Or know anything about Rick Kashenberg/Adam Kashenberg? I know ones the owner and ones the son that’s going to be owner.

    I’m just curious who’s leading the way and who has a good reputation (may want to give one of them some business)

  4. robin said:

    Hey Steve,

    i used to do some business with rick kashenberg. I had met adam a few times but he was still young. from wat i here now adam kashenberg works with rick and is helping him run the place. i talked to a friend a few weeks ago he says adam is execelent and rick as usual is still good. rick has years of experience so if you want your product made i would recommend adam nutrition. they know what they are doing

  5. mackenzie brown said:

    In regards to above, rick is one of the most well known accredited ceo’s in the industry. I met him at a convention a few years back. From what I know about adam he is helping lead the corporation. He’s definitely next in to take it over and even though he’s still young, he’s been there for years and is good leader and one of the innovators of the industry im sure he’s learning from daddy so he has to be good. check out npi center or google them im sure u can find plenty

  6. cameron L said:

    Yeah rick is definitely one of the best around. Adam Nutrition definitely produces for some of the biggest companies. Pretty sure they are producing for amway. My girlfriend tells me that adam is a really good leader and is intelligent. She told me even in high school he was 1 of the smartest and best employees the company has and that he wil be owner soon

  7. Sanjay said:

    I was dealing with Adam Kashenberg at the previous company I worked for. It’s so funny because here’s this kid thats probably no more than 24 years old calling me up answering my questions and whatnot, so you think it’s going to be a disaster. Not even close.. he’s brilliant, lots of creative solutions to the problems we had back then. He did seem overloaded a lot of the time but always picked up the phone. If you’re looking for a CoMan to do your line i would suggest either Adam Nutrition or if you’re on the east coast give NBTY or GSN a call. All are good but Adam’s probably on top as of now for the biggest ones. None are perfect but that’s business.

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