Glanbia pays €213m for US sports nutrition firm

FOOD GROUP Glanbia has bought US-based Optimum Nutrition in a deal worth $315 million (€213 million).

Optimum is a leading manufacturer of nutritional supplements for the US sports sector, including Optimum Nutrition and ABB. The privately-owned company, which is based in Illinois, has three operating facilities located in Illinois, South Carolina and Florida employing 387 people. In 2007, Optimum generated revenue of $185 million and operating profit of $32 million. At the end of December last, the company had gross assets of $51 million.

Glanbia said the business was being acquired on a debt-free basis and would be funded from its existing resources. Glanbia managing director John Moloney said he expected the acquisition to be earnings enhancing this year.

"This is an exciting acquisition for Glanbia as it gives us a leading position of scale in a fast growing segment of the nutrition market," he said. "It is a close strategic fit with our core areas of expertise in whey and sports nutrition and brings us up the value chain into consumer markets.

"Optimum also fits very well with the group's stated growth strategy and ambition to continue to internationalise our business."

Glanbia has spent close to €500 million since 2004 to focus on building a food-ingredients and nutrition unit and cutting reliance on milk and cheese.

The global nutrition market is estimated to be worth €228 billion a year, according to Glanbia. The sports and fitness nutrition market has annual sales of $30 billion and is growing by about 7 to 8 per cent annually, the company said.

Gavin Kelleher, an analyst with Merrion Stockbrokers, described the acquisition as a "logical deal" for the group.

"It adds further critical mass in the nutritional ingredients area, deepening its product range and extending its customer base, increasing Glanbia's growth opportunities, both organic and acquisitive, in this market," he said. The purchase price multiples of 1.7 times 2007 sales and 9.8 times 2007 operating profit were not unreasonable given the deal was a good operational and strategic fit, and added growth opportunities, said Mr Kelleher.

Goodbody analyst Liam Igoe said the acquisition of the sports nutrition company, which was already a major customer of Glanbia, made sense for the company. "There should be scope for synergies with the acquisition, as Glanbia is a major manufacturer of whey protein, in particular, which is a main ingredient in these products," he said. "It has basically bought one of its own customers."

With the acquisition of Optimum Nutrition, Glanbia is now a fully integrated nutrition enterprise from production, business to business through to final consumer, said John O'Reilly, an analyst with Davy stockbrokers.

"Whey, whey fractions and peptides have applications across the broad nutrition category - sports, diet and obesity, therapeutic body care," he said.

"Glanbia had nutrition science and technology; route to market and customer lists were its deficit. But this deficit has been progressively eliminated through acquisitions. It now has routes to all market segments and strong customer lists. New whey-based solutions for the various nutrition categories will be easier to introduce to market."

Shares in Glanbia surged by nearly 6 per cent, adding on 26 cent to €4.61 on the back of the acquisition. - (Additional reporting, Bloomberg)