L Catterton to make nearly 10x on Zarbee’s Naturals sale

  • Zak Zarbock, MD, founded Zarbee’s in 2008
  • Zarbock is a pediatric physician in Utah
  • L Catterton acquired a majority of Zarbee’s in 2011

L Catterton, the consumer-focused PE firm, will make roughly 10x its money with the sale of Zarbee’s Naturals, a source said.

Johnson & Johnson Consumer Inc said July 30 that it agreed to buy Zarbee’s, which makes “family-safe” health and wellness products that are free from drugs, alcohol, gluten and dyes.

Terms of the transaction, which is expected to close in Q3, weren’t disclosed. J&J is buying all of the company. The sellers include L Catterton and Sorenson Capital.

Zak Zarbock founded Zarbee’s, Draper, Utah, in 2008 when he was looking for a safe and chemical-free alternative to treat children’s coughs.

Zarbock, a pediatric physician, sold a majority of the company to Catterton. He remains distantly involved, the source said. Sorenson, a growth firm out of Lehi, Utah, invested in Zarbee’s in 2014, PitchBook said.

Zarbee’s is a leading cough syrup for kids under age six. Zarbee’s has a near 16 percent market share in the pediatric cold and cough sector, more than its biggest competitor Mucinex, the source said.

Other Zarbee’s products for kids includes cough soothers, a chest rub and a saline nasal mist. For adults, Zarbee’s also makes cough syrup as well as vitamins and supplements.

The investment dates to June 2011 when the PE firm, then known as just Catterton, acquired a majority of Zarbee’s. L Catterton invested a total of $25 million equity in Zarbee’s, the source said.

Sales for Zarbee’s have grown nearly 20x to its current $100 million under L Catterton’s ownership, the source said.

“When we partnered with Zarbee’s Naturals in 2011, we saw a great opportunity for the company to essentially build a new consumer category by becoming the leading, trusted, natural health and wellness OTC brand,” said Scott Dahnke, L Catterton’s global co-CEO, in a statement.

L Catterton launched a process for Zarbee’s earlier this year, hiring Jay Novak of Houlihan Lokey to advise. The process targeted strategics, and not private equity, because they could build on the platform Catterton had assembled for Zarbee’s, the source said.

The investment in Zarbee’s came from L Catterton’s first growth fund, which collected $316 million in 2008. The firm’s second pool weighed in with $420 million in 2013, while Catterton’s third growth pool closed on $615 million in 2016.

Over 60 percent of Catterton Growth Partners III LP is invested, the source said. The firm is in talks with investors about the timing and process for its fourth growth fund, the person said.

L Catterton was formed in 2016 when L Capital, the PE arm of LVMH, combined with Catterton, the U.S. buyout shop, the New York Times reported. Groupe Arnault also invested, the story said.

L Catterton, which has more than $15 billion of equity capital, is investing out of its eighth flagship fund. The flagship closed on $2.75 billion in 2016. The firm, along with Temasek, recently invested in ClassPass. Other transactions include Chopt, Alasko and Core Power Yoga.

Finn Dixon & Herling provided legal advice to Zarbee’s.

J&J, Zarbock, Sorenson and Zarbee’s could not be reached for comment. Houlihan declined comment.

Action Item: Call Bret Furio, Zarbee’s CEO, at +1 877-528-0420