(Test run)
Nestle announced on 30th April that it has entered into an agreement with PE firm KKR to buy The Bountiful Company (TBCo). TBCo will come under Nestle's Health Science (NHSc) division, and synergies between the firms will be fully established by 2024.
Background: Nestle is multi-national F&B conglomerate that deals with many types of food. Its NHSc division is a leader in the nutritional science space, and sells nutritional products for various purposes, from food allergies to constipation. On the other hand, TBCo is also in the nutrition and supplement industry, and is a pure play branded leader. TBCo blends science and nature to manufacture, market and sell their products to improve people's health and wellness.
Why: TBCo seems to be strategically in line with NHSc's vision and angle, which is to integrate science to improve health and wellness. TBCo has several high-growth brands that will be crucial to improved and sustained growth for NHSc, including Nature's Bounty and Solgar. This is especially the case when TBCo's brands complement NHSc's brands. Ultimately, this establishes NHSc as the industry leader, with increased growth especially with their synergies in play.
Details: The deal is valued at US$5.75b, on a cash-free debt-free basis with multiples of 3.1x net sales and 16.8x EBITDA. Net sales of acquired brands LTM 31 March 2021 were US$1.87b, EBITDA 18.3%.
Thoughts: This acquisition benefits NHSc as stated above. For TBCo, joining NHSc also has its benefits. TBCo is vertically integrated and manufactures, markets and sells its own products. Nestle's global outreach and e2e supply chain will increase TBCo's production output and outreach to global markets, increasing sales and profit growth. Overall, NHSc will be the key player in this industry with increased sales and profit growth. The key to the success of this acquisition would be to manage the integration well by ensuring synergies between the companies are maximised.
