On April 9, 2012, private investment firm Sun Capital Partners announced that an affiliate purchased dietary supplement contract manufacturer CornerStone Research & Development. CornerStone manufactures more than 500 different capsules, tablets and powders across nearly all supplement categories in a 190,000-square-foot facility in Ogden, Utah. Sun Capital, with corporate headquarters in Boca Raton, Fla., is a global investment firm with $8 billion under management. Terms of the acquisition were not disclosed.
“CornerStone is a market leader that has all the ingredients for long-term success,” Marc Leder, Co-CEO of Sun Capital, said in a release. “With our industry experience and operational expertise, we will support management in executing initiatives designed to continue to grow and improve the business.”
CornerStone’s purchase is the latest in a raft of supplement company acquisitions, including Pfizer’s purchase of Alacer, Procter & Gamble’s acquisition of New Chapter and Schiff’s purchase of Airborne. CornerStone is different in that it’s a contract manufacturer, without consumer-facing products, but is evidence of continued interest in the supplement arena.
“From a high level, what interested us were the growth rates for supplements in the last five years, and projections for coming years,” Michael Shepard, vice president at Sun Capital, told Nutrition Business Journal. “This industry is going in the right direction from a growth standpoint. There’s nothing we can see that would change that.”
According to Shepard, CornerStone came across through an auction process and attracted Sun Capital as a strong buy. “Of course they have strong relationships with their customers and distributors,” he said, “but what really attracted us to CornerStone was their focus on quality.” CornerStone’s manufacturing is NSF and cGMP certified, and has maintained Therapeutic Goods Administration certification since 1999.
Investors interested in entire supplement supply chain
NDIs be damned, investors and strategics are still hot for supplements. Valuations are hearty and many companies seem ready to sell. Buyers are either unaware or unfazed by the potential implications of the U.S. Food & Drug Administration’s New Dietary Ingredient (NDI) guidance, and expect strong growth for the supplement sector in coming years.
There’s blood in the water since the Alacer acquisition, stirring up both buyers and sellers. At a remarkable estimated multiple of 20x EBITDA, the Pfizer/Alacer deal seems to have opened the floodgates, prompting sellers to seek out premium valuations.
“We’ve seen a couple recent supplement deals close well,” said Sun Capital’s Shepard, though he said that wasn’t the impetus for the CornerStone acquisition.
That investors are interested in all aspects of the supplement supply chain, from manufacturers to branded products, speaks to the strength of finance in the supplement market. Consider also the numerous deals involving raw material & ingredient suppliers from 2010 and 2011, including BASF’s purchase of Cognis, DSM’s acquisition of Martek and Dupont’s acquisition of Danisco.
Sun Capital has no immediate intention to alter CornerStone’s current focus and will leave the company’s management team intact. According to Shepard, CornerStone will likely explore powdered drink mixes as a growth area for the future.