Schiff Buys Airborne, Enters Immune Category

SALT LAKE CITYSchiff Nutrition International Inc. entered the immune health category by acquiring the popular immune support company Airborne Inc. on March 30, 2012 for $150 million in cash.

Currently, Schiff is a large force in the digestive (Digestive Advantage with BC30®), joint (MoveFree Ultra with UC-II®) and heart health (MegaRed brand krill oil with SuperBa) products categories.

This acquisition, according to Tarang Amin, president and chief executive officer of the compan, will establishes Schiff as a leader in the immune support segment. "Airborne is a strong brand and will make an excellent addition to Schiffs portfolio, and we plan to leverage our science, innovation, marketing and sales capabilities to further its growth."

Airborne develops and sells innovative dietary supplements throughout the United States and Canada, as well as online. Its Airborne health formula is designed to support customers immune systems through its combination of vitamins, nutrients and proprietary blend of herbal extracts. Its immune support products include iconic effervescent tablets, new chewable tablets and on-the-go packets, all in a variety of flavors.

"We are happy to see our business move to the team at Schiffthey bring great talent and resources to the business and share our passion for building a leading immune support brand," said Marti Morfitt, Airborne Inc.s chief executive officer.

This acquisition wasn't surprising to Marco V. Galante, Principal, J.H. Chapman Group LLC, which is an investment banking firm with consulting services for the food industry, who pointed to Proctor & Gamble's recent acquisition of New Chapter Inc. to show a growing trend of consolidation. "Consolidation is inevitable given the larger number of small market participants," he said. "Furthermore, consolidation within the entire verticalfrom ingredient producer to the consumeris very compelling as a defensive and offensive means of protecting and controlling ones own intellectual property as well as enhance both cost and margin structures."

Amin added that Schiff intends to couple Airbornes product portfolio with Schiff's science and innovation, noting Schif is conducting a study with Dr. Glenn R. Gibson at The University of Reading in the UK on the effects of BC30 probiotics (from Ganede30) on the immune function of healthy elderly persons. " This is but one of the many potential opportunities to bring science and innovation to Airborne," Amin said.  

Galante noted the acquisition is accretive and complimentary for Schiff in terms of product range and offering. It also broadens Schiff's mass market retail presence and shelf space, which gives the company more leverage at distribution level. "Schiff will definitely be able to leverage the airborne brandfor addition to its own immune offering and for Schiff formulations under the airborne brand to consumers of Airborne whom may not have considered Schiff branded supplements in the past," he said.

Under the terms of the purchase agreement, Schiff acquired 100 percent of Airbornes stock from GF Capital Private Equity Fund LP for $150 million, subject to certain adjustments. Schiff funded the all-cash transaction through a combination of a new debt facility and cash on its balance sheet.

Airborne generated net revenue of approximately $70 million for the 12 months ended February 29, 2012. Preliminarily, the company expects to recognize transaction related costs of approximately $4.5 million in fiscal 2012, of which $0.9 million was recognized during the third fiscal quarter.

The transaction is expected to become accretive during the first half of fiscal year 2014.

Find out how to enter the immune health category by attending the SupplySide MarketPlace education session, "Health Condition: Immune System," on Thursday, May 10, 9 a.m. to 11 a.m., Javits Center, New York