Helen of Troy to acquire Healthy Directions

Purchase price will be approximately $195 million in cash.

Helen of Troy Ltd., designer, developer and worldwide marketer of brand-name housewares, health care/home environment and personal care consumer products, announced that it has entered into a definitive purchase agreement to acquire Healthy Directions LLC and its subsidiaries (Healthy Directions), a U.S. market leader in premium doctor-branded vitamins, minerals and supplements (VMS), as well as other health products sold directly to consumers. The purchase price will be approximately $195 million in cash, subject to certain customary closing adjustments. The sellers are certain funds controlled by American Securities LLC and ACI Capital Co. LLC. On a trailing twelve month basis through March 2014, the acquisition implies a multiple of less than 8.0 times adjusted EBITDA. Following the closing of the acquisition, Healthy Directions will continue to be based in Bethesda, Md.

The acquisition is expected to be accretive on a cash flow, adjusted EBITDA and adjusted EPS basis. With net sales of approximately $145 million in calendar year 2013, Healthy Directions is expected to increase Helen of Troy’s revenues by more than 10 percent on an annualized basis. Healthy Directions grew 8.4 percent in 2013 compared to 2012, ahead of the industry trend in the VMS market.

Entering the VMS category is a logical step for Helen of Troy as it continues to capitalize on the health and wellness trend, which builds on Helen of Troy’s acquisitions of Kaz in December of 2010 and PUR in December of 2011. Healthy Directions’ portfolio of supplements and health care products is branded with the names of highly respected physicians and nutritional experts in attractive product segments such as heart health, digestive health, joint health, skin care, and vision support. It has a strong, innovation pipeline and an advantageous direct marketing and delivery capability, which encourages consumer education and automatic replenishment. According to Nutrition Business Journal, the VMS market is expected to continue growing at a mid-to-high single digit rate annually through 2020. Healthy Directions, which targets consumers aged 55 and up, expects to benefit from the aging of the U.S. population with over 70 percent of those 55 and over taking vitamin supplements in 2013. According to the U.S. Census Bureau’s national population forecast, the 65-to-74 age segment is expected to grow more than 50 percent between 2012 and 2025, and the segment of age 75-plus is expected to grow more than 40 percent.

Tim Meeker, chairman of the board, commented: “We are delighted to announce the acquisition of Healthy Directions. This acquisition fits well with our stated goal to invest our cash flow for the benefit of shareholders. Helen of Troy has significant balance sheet strength, which enables it to support its current brands and businesses, evaluate strategic acquisitions, and repurchase outstanding shares. We have been searching for the right acquisition for over two years and believe Healthy Directions is a strong fit for us both strategically and financially. Following the acquisition, Helen of Troy will continue to have an attractive debt to adjusted EBITDA ratio of less than 3.0 times and a strong cash flow generation profile.”

Julien R. Mininberg, chief executive officer, stated: “The heart of our acquisition strategy is to create value for our shareholders by adding growing businesses that are good strategic fits with our portfolio. Healthy Directions will add another strong pillar to our growing portfolio of market-leading health and wellness businesses that includes thermometers, humidifiers, vaporizers, air purifiers, and water purifiers. Healthy Directions is poised to continue capitalizing on the expected growth in its market. It has a substantial presence in the premium direct-to-consumer VMS category, a proven track record of growth over the past three years, and initiatives in place to continue its momentum. We also like Healthy Directions’ direct-to-consumer business model, which drives growth by focusing on education, replenishment, and customer loyalty with a wide range of high-quality products and programs designed to drive repeat purchases. Healthy Directions’ direct-to-consumer marketing platform also provides a new capability at Helen of Troy, reaching consumers directly through the internet, phone and direct mail, diversifying our go-to-market vehicles, as opposed to primarily brick and mortar retail and online retailers in our other businesses.”

Mininberg continued, “Healthy Directions marks our third acquisition in less than four years, and is strongly aligned with our disciplined financial criteria. We are acquiring expected revenue growth rates and gross profit margins above our organic averages, and strong new cash flow at an attractive price. Healthy Directions’ gross profit margin in calendar year 2013 was approximately 30 percentage points higher than Helen of Troy’s consolidated fiscal year 2014 gross profit margin, advancing our strategy of favoring businesses with high-margin consumables. The cash flow accretion from Healthy Directions helps us continue to keep our balance sheet strong so we can allocate capital to accelerate value creation for our shareholders. We will continue to evaluate acquisition opportunities across a wide range of categories and geographies. The continuity of Healthy Directions’ management team is a key ingredient, as our recently-announced shared service reorganization continues to transform other areas of our Company and allows our business segments to remain focused on delivering innovative products that drive sales at increasing rates of profitability. I would like to take this opportunity to welcome the entire Healthy Directions team to the Helen of Troy family.”

Connie Hallquist, chief executive officer of Healthy Directions, stated: “We are very excited to join the Helen of Troy family. We admire the portfolio of businesses Helen of Troy has built, its consistent growth and profitability, and are eager to become a part of the Company. Our brands and products will benefit from greater access to capital, strong back office capability, a developed international platform, and other health and wellness businesses that may benefit from our business model over time. I look forward to continuing to lead Healthy Directions as part of Helen of Troy and believe our growth prospects will be even greater in the years ahead.”

The transaction is expected to close during Helen of Troy’s second fiscal quarter, subject to customary closing conditions, including regulatory approval.

J.P. Morgan Securities LLC acted as an exclusive financial advisor to Helen of Troy Limited on the acquisition of Healthy Directions. Additionally, JPMorgan Chase Bank, N.A. and Bank of America, N.A. provided committed financing for the transaction. Houlihan Lokey served as exclusive financial advisor and assisted in structuring and negotiating the transaction on behalf of Healthy Directions. Baker & McKenzie LLP acted as legal counsel to Helen of Troy Limited in connection with the transaction. Kaye Scholer LLP acted as legal counsel to Healthy Directions.


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