Nutrition 21 Buys Omega-3 Biz

PURCHASE, N.Y.--Nutrition 21 (NASDAQ:NXXI) has signed an agreement to purchase Iceland Health, an Omaha, Neb.-based omega-3 and fish oil manufacturer, for various cash and stock amounts reaching as much as $22.5 million. Iceland Health, which posted revenues of $26 million for the year ended June 30, has exclusive U.S. rights to market and sell fish oil and omega-3 fatty acids that are manufactured by an Iceland company to pharmaceutical standards utilizing a patented distillation process. The acquisition is subject to satisfactory due diligence and standard terms and conditions.

Paul Intlekofer, president and chief executive officer (CEO) of Nutrition 21, reported the acquisition of the Iceland Health business would build on his company's strategy to leverage its biosciences roots and to continue developing and marketing proprietary and clinically substantiated nutraceuticals that address significant health care concerns. "Over the last year Nutrition 21 has transitioned from an ingredients model to a supplier of finished products," he said. "The combined business of Nutrition 21 and Iceland Health would offer a broad line of proprietary products shown to be effective in the areas of insulin resistance, obesity, diabetes, cardiovascular disease, depression and joint health."

The deal will also open up a new outlet for Iceland Health products, which are currently marketed through direct response channels including TV infomercials, call centers and Internet e-commerce. "We have a talented retail sales force and established relationships with the major retailers in the United States and could look forward to taking the Iceland Health franchise into retail," Intlekofer said.

"We are impressed by the science and market opportunity for Nutrition 21's Chromax, chromium picolinate and Diachrome," added Mark Stenberg, CEO of Iceland Health. "We have experienced significant growth in our business over the last several years and we see a great fit in combining our expertise and products with those of Nutrition 21 to build a formidable consumer health products company."

The purchase price that Nutrition 21 would pay at the closing consists of 8 million shares of Nutrition 21 common stock, $1 million in cash, $2.5 million in notes due in three years with 5-percent interest, a maximum of $2.5 million in earn out payments, and the potential issuance of 1.5 million additional shares of common stock (depending on the market price of Nutrition 21 stock a year after the closing). The two principals of Iceland Health would be employed by Nutrition 21 under three-year employment agreements.