NBTY Buys Rexall Sundown

BOHEMIA, N.Y.--The guessing game is over--Rexall Sundown, a supplement manufacturer owned by The Netherlands-based Royal Numico, was sold to NBTY Inc. for $250 million in cash. Industry insiders had speculated NBTY would buy the supplement line, especially after it signed a letter of intent to acquire Royal Numico's European GNCs in February. For the year ended Dec. 31, 2002, Rexall had sales of $455 million.

With this acquisition, NBTY (NASDAQ:NBTY) is now owner of all Rexall brands, including CarbSolutions, MET-Rx and WORLDWIDE Sports Nutrition. The sale also brings with it Rexall's production facilities and warehouses, as well as 290 employees. The transaction is subject to regulatory approvals and is expected to be finalized in the third quarter of 2003 (3Q03). NBTY did not foresee approval being a problem, since even with this acquisition, NBTY's wholesale side will "still remain an insignificant share of the marketplace," it said in a statement.

"Rexall Sundown will play a key role in the further growth of our wholesale business by allowing NBTY to offer a greater number and variety of products, expand manufacturing operations and enhance delivery and service to our growing customer base," Scott Rudolph, NBTY chairman and chief executive officer (CEO), said in the statement.

According to Jan Bennink, Royal Numico CEO, this sale will help the company focus its attention and resources on its baby food and clinical nutrition division, in addition to the floundering sales of U.S. GNCs.

During a June 10 press conference held by NBTY, the company reported it would be assuming certain liabilities with the acquisition of Rexall Sundown, minus those liabilities concerning ephedra, which Royal Numico would be handling. NBTY was also guaranteed a certain amount of working capital with the sale, the sum of which was not disclosed.

NBTY met with Rexall staff early June 10 but did not have a plan of action yet for merging with the company. NBTY did not have many answers to questions raised by this acquisition, including whether staff at both companies would remain the same and whether executives would stay or be replaced. "Right now, we're in the learning curve, not the decision curve," said Harvey Kamil, NBTY president and chief financial officer, during the press conference. "Right now, we're strengthening our numbers and increasing our sales. We don't have a plan right now, and we're learning what to do and how to do it."

Kamil added NBTY would have more answers in a month's time, when the company's 3Q03 results are reported. In terms of increasing sales numbers, NBTY reported that one cash cow is certain--GNC has a contractual obligation to buy product from Rexall for the next five years.

At press time, NBTY's stock had risen 16 percent to a selling price of $20.10 per share.