Nutritional alliances proved M&A alternative in 2009, report

By Jane Byrne

- Last updated on GMT

Related tags Nutrition

A difficult funding climate resulted in more licensing and joint venture transactions than outright acquisitions in the health and nutrition sector in 2009, according to a new report focusing on M&A trends in the industry.

The latest report on M&A activity in the health and nutrition sector from the US-based consultants, the JH Chapman group, claims that a substantial increase in licensing and joint ventures from 21 in 2008 to 53 in 2009 is reflective of on-going interest for growth via unique technology and knowhow and lack of access to financing.

And the authors highlight the recent strategic alliance that the Canadian natural and organics group SunOpta entered into with Specialized Protein Products of South Africa, to increase its profitability and gain access to soy ingredient markets.

They note that there were 53 health and nutrition M&A transactions in 2009, marginally lower than the 58 in 2008, excluding licensing and joint ventures, financings, retail and distribution.

The consultants add that potential buyers’ continuing focus on companies with singular technology such as pre and probiotics, enzymes or cultures is also a contributing factor to the slowing down of M&A activity in the sector.

However, JH Chapman predicts a higher level of M&A transactions in 2010, noting the near record amount of private-equity capital currently available for investment, and increasing indications that the worst is over for the worldwide economic downturn and financial crisis.

Per category breakdown, the consultants report a higher level of M&A activity on the previous year in the functional beverage and dairy category, with consolidation moves in the segment accounting for one third of the total healthy, natural, organic and functional food and beverage M&A transactions for 2009.

Coconut water purchases grabbed some of the headlines in the healthy beverage acquisitions, with the authors, citing the Pepsico buy up of Amacoco, Brazil's largest coconut water company in August, and the subsequent investment by PepsiCo and Coca Cola in two emerging coconut water brands, O.N.E. (One Natural Experience) and Zico respectively.

In terms of the teaming up of ingredient suppliers, the consultants highlight the merger in October last year involving Naturex and Spain-based Natraceutical Group, with the expansion bringing to Naturex such markets such as natural colouring agents, fruit and vegetable powders, pectins, functional ingredients, yeast and caffeine.

Naturex said at the time that the deal would help the company double earnings from its 2008 income of €93.2m to €185m in 2009.

Since its acquisition of Pure World in 2005, Naturex has acquired several ingredient companies including HP Botanicals, Hammer Pharma, Chart Corporation and most recently, Berkem's ‘Actifs Innovants’ division, added the authors.

And, on the digestive health front, the report highlights the acquisition by Attune Foods, a manufacturer of probiotic chocolate bars, of the Uncle Sam and Erewhon cereal brands from US Mills, further expanding Attune’s portfolio of health food products.

JH Chapman said future M&A activity will be impacted by trends such as the global rise in food prices, increased consumer demand for immunity boosting products on the back of the swine flu and other fears along with the current consumer trend towards preventive ‘medicine’ brought about by the current economic climate, in combination with increasing availability of high value-added natural formulations.

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