News & Events
News
J.H. CHAPMAN GROUP,
L.L.C. AND HEALTH BUSINESS PARTNERS, L.L.C. AGREE ON COLLABORATION
03/15/07
J.H. Chapman Group, L.L.C., a
Chicago-based investment banking firm specializing in the food and food
ingredient industries, has entered into a collaboration agreement with
Health Business Partners, LLC, an investment banking group focused on
the organic, functional food and supplement sectors.
This affiliation provides J.H. Chapman
Group's clients direct access to greater opportunities in more market
segments and with increased support services, particularly in market
research.
The affiliation with Health Business
Partners creates a strategic relationship that reflects an important
developing trend of the "fusion" of the food, functional food, and
supplement market sectors. It also expands the market reach and the
scope of services of the J.H. Chapman Group in North and South America
and Western Europe.
Marco V. Galante, Principal, J.H.
Chapman Group will be pleased to respond to questions concerning this
collaboration and may be contacted at (773-693-4800, or
mgalante@jhchapman.com).
DOW
JONES - LBO WIRE, PE FIRMS CAPITALIZE ON STRATEGICS' THIRST FOR HEALTHY
DRINKS 12/28/2006
Private equity firms backing healthy
beverage brands are having their thirst quenched by strategic buyers,
who have gulped down at least three buyout-backed drink companies in a
three-month span this year.
PepsiCo accounted for two of the deals,
buying the sparkling juice brand Izze Beverage Co. in August for $75
million from backers Greenmont Capital Partners and Sherbrooke Capital,
and announcing in October a deal to buy the juice and smoothie company
Naked Juice Co. from North Castle Partners for an undisclosed amount.
Tata Tea Ltd., an Indian company that
oversees the Tetley Tea brand, accounted for the other deal, snapping up
a 30% stake in Energy Brands Inc., which makes enhanced water under the
vitaminwater, smartwater and other names, from TSG Consumer Partners for
$677 million in August.
Industry experts say the spurt of exits
has also been driven by strategic buyers' needs for new brands with a
healthy bent. "They're all trying to rejigger their product portfolios
to more healthy products," said Mike Chase, a managing director at
Health Business Partners, a boutique investment bank in Warwick, R.I.
Beverage companies like Cadbury
Schweppes PLC, Coca-Cola Co. and PepsiCo have pledged to cut back on the
number of sugary drinks in public schools by the 2008 school year and
are making preemptive moves to ensure they can still distribute into a
key segment. And acquiring a small company that can be plugged into a
larger distribution pipeline is a better bet than developing a brand
from scratch.
"Pepsi and Coke don't make acquisitions
of these beverage companies because they can," said Scott Van Winkle, a
managing director at investment bank Canaccord Adams Inc. "They see the
need."
That need on the part of the strategic
buyers can pay off handsomely for private equity firms, as large drink
companies can pay high multiples for smaller drink brands since sales
will likely spike after the acquisition simply by being plugged into the
larger distribution network. From about 1997 until 2002, strategic
buyers were paying cash-flow multiples in the mid- to high-teens for
drink companies, Van Winkle said, a number that has only come down
slightly.
"In the end, we're the ones that
benefit," said Chip Baird, founder of North Castle Partners. The firm
did not reveal specifics on their return on the Naked Juice sale,
although they were pleased with the returns. Greenmont and Sherbrooke
both reaped exits of about three times their equity in the sale of Izze
Juice.
TSG Consumer Partners benefited
handsomely by backing Energy Brands, which was carving out an entirely
new category in the beverage space in enhanced water. It saw its $40
million equity investment appreciate nearly 17 times in just three
years, LBO Wire has reported.
Such exits are reminiscent of the
blockbuster success that Thomas H. Lee Partners had in investing in
Snapple Beverage Corp., which the firm sold to Quaker Oats Co. in 1994
for more than $1.7 billion, earning an astounding $872 million profit on
a $28 million equity investment.
By installing new management teams,
increasing distribution networks and ramping up marketing campaigns, PE
investors often help beverage companies break through the $50 million
annual sales threshold, thereby making them more palatable to strategic
buyers, said Van Winkle, of Canaccord.
PepsiCo, however, dipped below that
sales mark when it bought Izze Juice, which had revenue around $25
million in 2005, showing that strategics may be willing to take a chance
on a smaller brand. That may lead to more drink companies emerging in
the healthy space, and likely more PE investing, Chase said.
"I think you're going to see it
starting to get more crowded, just like any category that's growing
quickly," Chase said.
Among other PE firms active in the
beverage sector is Madison Dearborn Capital Partners, which in 2005
acquired a 72% stake in Wm. Bolthouse Farms Inc., which makes fruit and
vegetable juices, for $1.1 billion.
TSG Consumer Partners also owns the
bottled water company Voss, of Norway, while Freestone Partners LLC, a
small Houston-based firm, bought the iced tea company Sweet Leaf Tea Co.
in July. Emigrant Capital Corp., a PE firm affiliated with Emigrant
Savings Bank, is investing in a number of drink companies as well,
including soda brands Boylan Bottling Co. and the Jolt Co. and the
Brazilian power juice brand Zola Acai.
Besides having a tasty drink, experts
say it's key to develop a strong distribution network in order to draw
the attraction of larger strategic buyers. However, with the sector so
hot and strategic buyers on the prowl, Chase said, most any investor in
a drink company now has been approached by a drink company parched for
growth.
Reach Greenmont Capital at
303-318-6510; Madison Dearborn Capital Partners at 312-895-1000; North
Castle Partners at 203-358-2100; TSG Consumer Partners at 415-217-2300.
http://www.mdcp.com
http://www.northcastlepartners.com
http://www.tsgconsumer.com
http://www.greenmontcapital.com
NATURAL FOODS
MERCHANDISER: FORUM AIMS TO PAIR INVESTORS, GROWTH STAGE-COMPANIES
1/10/2006
Health Business
Partners and Natural Products Consulting are teaming up to connect young
companies with investors in an online investment forum.
The first Healthy Products Capital
Forum is scheduled for Thursday, Jan. 19 at 1 p.m. EST.
A select group of companies will
present to a group of qualified venture capital firms. Each company will
have 15 minutes to present its business plan and 10 minutes to answer
questions.
"We're thinking it's a nice response to
a huge market void that we see," said Mike Chase of Warwick, R.I.-based
Health Business Partners.
Chase said that Health Business
Partners, which is an investment bank focused on five health industry
segments, has seen an increase in calls from both sides: small companies
looking for capital, and venture firms wanting to invest in naturals but
lacking industry expertise.
"These are firms that have said, 'We're
going to go after health and wellness, or natural and organic,' as one
of three or four verticals that they've identified," Chase said. "These
funds are $20 million up to $100 million. They want to write $2 million
to $3 million checks."
Instead of telling everyone no, Chase
said, the partners decided to set up a freestanding business to make
potential connections. Natural Products Consulting's founder, Bob Burke,
is a partner.
Forum organizers are looking for
companies seeking to raise $500,000 to $5 million. Rather than startups,
the forum will highlight growth-stage, revenue-producing companies that
are looking for their first institutional financing.
Product categories include healthy,
natural, organic and functional food and beverages; vitamins, minerals
and supplements; natural over-the-counter remedies, personal care,
household and clothing; and ingredient suppliers to the naturals trade.
Companies interested in participating
must submit their PowerPoint presentations by Jan. 12. For more
information, visit
www.healthycapital.com.
M & A: CASH AND
COMPANIES STILL SEEK ONE ANOTHER
NATURAL FOODS
MERCHANDISER: JUNE 5, 2006
“With natural and organic
products posting strong sales in every trade channel, companies in the
industry remain coveted prizes in the mergers and acquisitions game
The cloud over nutritional supplements has lifted, at least from an
investor perspective, with several supplements companies changing
hands last year," said Mike Chase, managing director of Health
Business Partners, an investment banking firm in Warwick, R.I.
“How long is the window open
for supplements? I think that’s what’s on everybody’s mind,” Chase
said. And what’s hot on retailers’ shelves remains hot in the private
equity markets, with natural and organic snacks, personal care,
home-care products and pet products attracting both buzz and capital.
The biggest deals in 2004, according to
Health Business Partners and NBJ, included the following:
- Leiner Health Products of Carson,
Calif., was recapitalized by North Castle Partners and Golden Gate
Capital to the tune of $650 million.
- Sports-fitness powerhouse EAS was
sold to Abbott Labs for $320 million.
- Network marketer Shaklee was sold by
its Japanese owners to Ripplewood Holdings LLC and Activated Holdings
LLC for $310 million.
- Kerry Group Plc paid $96 million for
Oregon Chai and Extreme Foods.
In December, Harvest Partners paid an undisclosed sum for Levlad/
Nature’s Gate, which posted about $200 million in sales.
Firms like Health Business Partners are
trying to figure out how to satisfy the capital needs of the many solid
small natural products companies seeking to reach the next level.
“There’s a dearth of financing sources out there willing to write $1
million to $5 million checks,” Chase said. New player Greenmont Capital
Partners, with $15 million to invest, is a rare exception.
“You have a bunch of capital that is
out in the marketplace today that wasn’t out there in the ’90s,” Chase
said. But, paradoxically, large private equity funds can’t justify the
time and effort it takes to invest in a small company that can offer
only a limited return. “A $500 million fund needs to make $25 million to
$30 million deals on average,” he said.
Private equity funds that have closed
successful placements—such as North Castle Partners’ sale of EAS to
Abbott Labs—now have money to invest. And strategic buyers, who sat out
the early years of the millennium, are returning in force, Turpin and
Chase said.”
MORE INFO
M&A PACE ACCELERATES
IN NUTRITIONAL PRODUCTS AND CONSUMER HEALTHCARE INDUSTRIES - NO SLOW
DOWN SEEN IN 2005
Food Institute
Report, March 21, 2005.
With over 75 food-related deals
underway or closed so far in 2005, activity remains strong. Healthy,
natural, organic and functional food and beverage companies are among
areas with strong interest from buyers, as witnessed during a Health
Business Partners (HBP) conference call on Nutritional Products and
Consumer Healthcare Industries. (HBP provided expert commentary for The
Food Institute's FOOD BUSINESS Mergers & Acquisitions 2004
published this month.)
"The healthy and
functional food segment is exploding with interest from buyers - fast
growing, branded properties with critical mass of sales in growth
categories are earning the highest premiums vis-à-vis comparable
properties," said Mike Chase, Managing Director of HBP. "The healthy
food and beverage market is extremely fragmented and many of the larger
properties have already traded hands' however, there is so much demand
from buyers, financial and strategic, for these healthy food and
beverage properties, we are now seeing the smaller properties in more
mature growth categories getting offered 10X trailing EBITDA."
The influx of private
equity firms offering attractive deal terms including recapitalizations
has provided added competition to strategic buyers across segments and
up and down the value chain. Financing, both early and later stage, has
also gained momentum for branded healthy, food and beverage
manufacturers, according to Roy Bingham, another HBP Managing Director.
RECAP OF HEALTH
BUSINESS PARTNERS MERGERS AND ACQUISITIONS CONFERENCE CALL
NPICenter, February 11,
2005. This past week's Health Business Partners (HPB) M and A call was a
success, with more than 40 participants and with a number of industry
sub-segments represented. The call, a direct result of high interest in
this area, was the first of a series planned by HBP over the course of
the year. "We are asked all the time by buyers and sellers what is going
on with M&A valuations, deal structures and buyer's appetites. Today's
call and our forthcoming market update report are convenient ways to
provide the information, guidance and answers to those questions," notes
HBP's Mike Chase. "Buyer interest is high - up and down the value chain.
We will be doing the update call more frequently, our next call will be
March 8, because there is so much activity in the M&A market right now
and we anticipate a number of transactions closing shortly."
