Probi USA, Inc. to Acquire Nutraceutix

07 Jun 2016 --- The Probi US subsidiary will acquire the operations of the US probiotic company TNTGamble, Inc., doing business as Nutraceutix, for a preliminary cash purchase price of US$ 105 million (corresponding to SEK 873 million) on a cash and debt free basis.

With this Acquisition, Swedish bioengineering company Probi will increase its market share in North America – the largest and fastest growing probiotic dietary supplements market in the world – more than three-fold to approximately SEK 418 million; add important new technologies; manufacturing capabilities and customers, and create a strong platform for further acquisitions.

The cash purchase price will be financed through available cash reserves, a credit facility of approximately US$ 35 million and a bridge facility of approximately US$ 63 million. Handelsbanken, acting as financial advisor, has committed to provide the credit facility and the bridge facility. The bridge facility will be repaid by proceeds from the Rights Issue of approximately SEK 600 million (US$74 million).

After completion of the Acquisition and the Rights Issue and the repayment of the bridge facility, Probi expects to have a leverage ratio (Net Debt/EBITDA) of approximately 1x on a preliminary combined basis.

Symrise AG and Fjärde AP-fonden, controlling approximately 51.4 per cent and 5.9 per cent respectively of the outstanding share capital and votes in Probi, have committed to, subject to customary conditions, vote in favor of the Rights Issue at the Extraordinary General Meeting on June 29, 2016 (the “EGM”), and subscribe for their pro rata shares in the Rights Issue. In addition, Swedbank Robur Fonder and Handelsbanken Fonder, together controlling approximately 11.8 per cent of the outstanding share capital and votes in Probi, have indicated their intention to vote in favor of the Rights Issue at the EGM and to subscribe for their pro rata shares in the Rights Issue.

The Acquisition is expected to close within four months and the Rights Issue is expected to be completed during the second half of 2016.

Peter Nählstedt, Probi CEO, states: ”I am very excited about this transforming acquisition. Nutraceutix is an excellent match for us. Probi and Nutraceutix have complementary business models, limited customer overlap and share strong entrepreneurial values. The acquision creates a strong platform to continue the growth story in the US and in the global market.”

Tim Gamble, CEO, Nutraceutix CEO, adds: “I cannot imagine a better combination of two well-respected organizations. With highly complementary expertise, assets, product offerings, and a shared strategic focus on quality-conscious growth, I envision an outstanding future for the new entity. The transaction will result in the creation of a global leader in the probiotics and probiotic dietary supplement space, and will open up a wealth of new opportunities for the company, its employees and its customers.”

Nutraceutix is a leading, highly regarded and customer service focused US manufacturer and supplier of probiotics. The company was established in 1983 and is today among the top five probiotic producers in North America.

Nutraceutix manufactures its products as bottled products (finished products; 57 per cent of sales in 2014), bulk and blended powder (20 per cent and seven per cent respectively) and tablets and capsules (16 per cent).

Nutraceutix’ customer base is composed of US and global brand distribution companies, retailers and direct-sellers as well as other contract manufacturers, mainly in the dietary supplement area. As of 2015, Nutraceutix maintains 173 active customer relationships (up from 141 customer relationships in 2013). A strong portfolio of e-commerce based clients has contributed to significant growth in recent years.

From a strong base in research and development, Probi has grown its well documented and differentiated product platforms to become a significant player in the global probiotics market. Probi’s objective is to generate growth that exceeds the market average. To achieve this, Probi pursues the following strategic priorities: 1) secure and enhance the existing product offering and customer relationships, 2) enter new markets with focus on the fast-growing markets in Asia and North and South America, 3) launch new products and platforms, and 4) enter new product areas and indications.

The Acquisition of Nutraceutix is highly aligned with these strategic priorities as it will strongly enhance Probi’s presence in the attractive North American probiotics market, add important new technologies, manufacturing capabilities and customers, and creates a platform for further acquisitions. The key attractions of the Acquisition are: strengthened presence in North America, broadened capability to enhance the product offering, strengthened position in the value chain, significant synergy opportunities, a platform for further probiotics acquisitions in North America, APAC and Europe, and adding new capabilities and intellectual property.

The combined company will retain the current Probi name and stock market listing and continue to promote each company’s brand. The head office will remain in Lund, Sweden. The main manufacturing location will be in the US while R&D and global marketing will be based in Lund.