Switzerland’s Nestlé is paying US$2.3 billion to buy Canadian vitamin maker Atrium Innovations, it said on Tuesday, expanding its presence in the consumer healthcare market as it seeks to offset weakness in its traditional packaged foods.
The world’s largest packaged food company is buying the maker of vitamins, probiotics and meal replacements from a group of investors led by European private equity firm Permira Funds. The business will become part of Nestlé Health Science, which already sells nutrition products for people with specific medical conditions.
Nestlé, the maker of Gerber baby food, Purina pet food and Nescafe coffee, has come under pressure this year to improve returns from activist shareholder Third Point.
The deal reflects Nestlé’s ambition to become a “nutrition, health and wellness” company and comments earlier this year from its new chief executive, Mark Schneider, who identified consumer health as a strategic priority as packaged food slows amid changing consumer tastes.
“They’ve been trying to articulate a message around Nestlé Health Science and health and wellness for some time,” Liberum analyst Robert Waldschmidt said. “In terms of nutrition, this makes sense.”
Reuters reported last week that Nestlé was also examining a bid for the consumer health business of Germany’s Merck, which also makes vitamins. Merck’s business has a big presence in emerging markets, Waldschmidt said, whereas Atrium tends to be concentrated in developed markets.
Atrium, which has seven factories in the United States, Canada, Europe and Argentina, is expected to have 2017 sales of US$700 million. Its biggest brand is Garden of Life supplements.
This is Nestlé’s fourth purchase in as many months. It announced deals for Sweet Earth vegetarian foods and Blue Bottle Coffee in September and Chameleon Cold-Brew coffee in November.
The purchase is expected to close in the first quarter of 2018.
Atrium was advised by Morgan Stanley, RBC Capital Markets and William Hood & Co, a division of AXIA Capital Markets.
Update: Québec City-based Atrium was taken private in 2014 by a Permira-led consortium. The acquisition valued the company at $1.1 billion. Existing Atrium investors Caisse de dépôt et placement du Québec and Fonds de solidarité FTQ backed the deal.
(Reporting by Martinne Geller; Editing by Susan Fenton and David Evans)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Denis Balibouse