On January 19, Irish dairy and ingredients supplier Glanbia announced its $144 million acquisition of leading sports nutrition company Bio-Engineered Supplements and Nutrition (BSN). BSN markets a full line of sports supplements, and is best known for its N.O.-XPLODE pre-workout mixes and Syntha-6 protein products. The company brought in $135 million in revenue in 2009, ranking among the top 25 largest U.S. supplement manufacturers that year, according to Nutrition Business Journal estimates. The purchase price represents only about one-times BSN's revenue, making the deal a relative steal for Glanbia.
Glanbia already maintains a large stake in the U.S. sports nutrition space, having acquired leading manufacturer Optimum Nutrition in 2008 for $315 million. Made up of two major divisions (dairy co-operative Dairy Ireland and a U.S. Cheese & Global Nutritionals segment), Glanbia has recently put a great deal of emphasis on growing its cheese and nutrition businesses. The company attempted to spin off the less-profitable Dairy Ireland in 2010, though to no avail, as the majority owners—co-op shareholders—voted down the proposal.
Deal strengthens Glanbia’s connection to consumer market
The BSN purchase clearly strengthens Glanbia’s path to the consumer market. Glanbia is a leading global supplier of whey ingredients and, as Anthony Almada, CEO of sports nutrition manufacturer GENR8, notes, BSN is “the second-largest consumer of whey protein on the continent.” The first largest is Optimum Nutrition. “Glanbia’s strategy,” Almada says, “is to own a consumer-direct vehicle to place the ingredients that they make out of their Ireland-based dairy cooperative, and then to enjoy a greater revenue stream because they are now selling direct to the consumer.”
The U.S. sports nutrition market totaled $2.9 billion in 2009 sales, according to NBJ research, and whey remains the preferred source of protein for sports nutrition formulas. Protein products are especially apt to foster a feedback loop—exercise and whey yield results, which yield repeat sales—offering a stable market platform for Glanbia’s dairy products. Glanbia’s apparent desire to jump ship from Dairy Ireland to focus on its cheese and nutrition segments speaks to both the volatility of the dairy industry and the real growth potential in sports nutrition, of which Glanbia now owns a $300 million-plus stake.
BSN itself has been called out of late over questions of product efficacy, most notably in a May 2009 article in Sports Illustrated that spoke to a labeling scandal involving a purportedly non-existent active ingredient in N.O.-XPLODE. Almada raised similar criticisms, calling BSN’s marketing a “Wizard of Oz tactic.”
So why would Glanbia want to acquire a company involved in such questions? According to Janica Lane, a director at investment firm PCG Advisors, the benefits and potential synergies BSN provides to a strategic investor like Glanbia probably outweigh any ingredient risks. “Generally [press] like the Sports Illustrated article do lead to increased awareness … but given that [Glanbia] already owns Optimum Nutrition, [it] has a great platform to plug BSN into. They also will be 100% owners running that business, so when it comes to things like formulation changes, they can call the shots and have the manufacturing and ingredient capacity to make changes pretty effectively.”
NBJtakes a closer look at the sports nutrition arena and its recently vibrant M&A landscape in our upcoming February Sports Nutrition & Weight Loss issue. To order online or become a subscriber, please visit the NBJsubscription page.
Hank Schultz and Carlotta Mast contributed to the reporting of this article.
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