Dutch Food Maker to Purchase General Nutrition for Cash
Dutch food maker Royal Numico is acquiring General Nutrition Cos., a leading producer of vitamins and other nutritional supplements, for $1.75 billion in cash.
The deal, under which Royal Numico would also assume roughly $760 million in debt, would create what the two companies called the largest firm in the world devoted exclusively to nutrition.
The purchase would give Numico access to the biggest distribution network for nutritional products in the U.S., where 45% of adults take vitamins and the market for supplements is expected to almost double to $16.6 billion by 2003. It would be the largest takeover for Numico and for the U.S. nutrition business.
The companies plan to jointly market products that Numico has developed, including nutritional supplements for athletes and heart patients. The two companies would retain their own names, and no job losses are expected as a result of the proposed deal.
Numico research director Albert Eenink said, “We have in the pipeline a lot of products that could both benefit the GNC business and the company in Europe,” he said.
While Pittsburgh-based GNC would benefit from Numico’s research, Numico could take advantage of GNC’s distribution and advertising, said Gary Giblen, an analyst for Banc of America Securities.
Royal Numico “really is an excellent research firm but not one that’s particularly worldly in bringing stuff to the U.S. or other parts of the world,” Giblen said. “It’s the simple and perfect marriage of marketing and research and distribution.”
GNC would almost double Numico’s sales to about $3 billion from $1.6 billion last year and would have added $91 million in net income last year to Numico’s $157 million.
GNC’s sales of $1.42 billion last year gave it 13% of the U.S. markets for supplements. Combining GNC’s marketing and branding experience with Numico’s research is expected to bring a 10% increase in sales by 2002.
“This transaction is driven by the revenue we can generate in the U.S. and in Europe, not by cost-cutting, layoffs or the closing of facilities,” GNC President and Chief Executive William Watts said in an interview. “Numico gains the No. 1 position in dietary supplements in the U.S. . . . and we get their proprietary research.”
Numico has 300 full-time employees devoted to clinical research in nutrition, Watts said. GNC plans to use the data to accelerate the variety of new products it introduces in its chain, Watts said. The research would also help fend off encroachment by pharmaceutical companies.
Numico, which is active in 40 countries from Europe to Asia, wants to tap GNC’s knowledge of mass-market retailing, in particular, drugstore sales. GNC employed 13,800 people in 4,203 stores in all 50 U.S. states and 25 foreign markets. It has formed alliances with Rite Aid Corp. drug stores and Internet retailer Drugstore.com Inc.
GNC shareholders would receive $25 per share for their stock, a slight premium over GNC’s closing price of $22.88 Friday on Nasdaq. Stock markets were closed Monday in observance of Independence Day.
Pittsburgh-based GNC announced in June that it was buying an 8% stake in Drugstore.com, an online prescription retailer, a move intended to build its strengths in advertising and distribution.
Numico, a major supplier of baby food in Europe, earned a profit of $180 million on sales of $1.6 billion last year. The company employed 10,500 people in more than 40 countries.
GNC had a 1998 profit of $90 million on sales of $1.4 billion.
