Nestlé to Buy Atrium Innovations for $2.3 Billion -- Update
By Ben Dummett and Saabira Chaudhuri
LONDON -- Nestlé SA agreed to buy Atrium Innovations Inc., a Canadian vitamin maker, for $2.3 billion, including the assumption of debt -- expanding its range of consumer-health offerings as sales slow for packaged-food staples like TV dinners and chocolate-powdered drinks.
Atrium owns Garden of Life and Pure Encapsulations supplement brands and is owned by a consortium of investors led by private-equity firm Permira. It will become part of Nestlé's health-sciences arm, which makes products like meal-replacement drinks and nutritional therapies for conditions like diabetes and dysphagia.
That unit had sales of $15.2 billion last year, up 2% from the previous year. Nestlé's overall sales last year were about $90 billion, most of that from businesses like coffee, bottled water, frozen food and candy bars.
Packaged-food makers like Nestlé and Kraft Heinz Co. are being buffeted by a number of forces. Fast-changing consumer tastes have shoppers fleeing some of these companies' big brands in favor of healthier options or locally or more naturally made goods.
Social media and e-commerce has leveled the playing field for some of these small new competitors -- making the big firms' research and development and marketing budgets less effective in holding on to market share.
Earlier this year, Nestlé abandoned its long-held annual sales-growth targets after years of missing them. A few months later, activist investor Daniel Loeb took a $3.5 billion stake in Nestlé, which makes Nescafe, Lean Cuisine and Nesquik, and demanded big change.
In response, Nestlé Chief Executive Mark Schneider has rolled out share buybacks and a formal profit-margin target. He also has said he is willing to shuffle 10% of the company's portfolio. In June, Nestlé put its North American chocolate business up for sale. The unit could bring in $3 billion, according to analysts.
But mostly, Nestlé has focused on small acquisitions and stake purchases since Mr. Schneider, a former health-care executive, took over in January. The Vevey, Switzerland-based company in recent months bought artisan coffee maker Blue Bottle, cold brew coffee brand Chameleon, and plant-based frozen foods maker Sweet Earth. It took a stake in subscriptions meals delivery company Freshly.
Greg Behar, Nestlé's head of health science, said buying Atrium would allow Nestlé to extend its product range in areas like probiotics, plant-based protein nutrition, meal replacements and multivitamins, including non-GMO, organic and natural supplements. The Wall Street Journal first reported Nestlé's plans to buy Atrium earlier Tuesday.
Montreal-based Atrium employs about 1,400 employees. Its brands -- which also include Wobenzym and Douglas Laboratories -- are distributed across more than 50 countries. Four years ago, Permira said it was buying 75% of Atrium for about 563.4 million Canadian dollars ($444 million).
The selling consortium also included a group of Quebec-based funds including the big Canadian pension fund Caisse de dépôt et placement du Québec.
Write to Ben Dummett at firstname.lastname@example.org and Saabira Chaudhuri at email@example.com
(END) Dow Jones Newswires
December 05, 2017 13:31 ET (18:31 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.