Science in Sport look to beef up protein offerings in PhD Nutrition acquisition

By Will Chu

- Last updated on GMT

©Science in Sport
©Science in Sport
Science in Sport (SiS) has revealed plans to acquire fellow sports nutrition firm PhD Nutrition in a €36.8m (£32m) deal, with the majority financed by a share offering subject to conditions.

Under the terms of the agreement, SiS will pay €32.6m (£28.5m) in cash with an additional €4m (£3.5m) raised  by the issue of 5,833,334 new Ordinary Shares to PhD priced at €0.69 (£0.60) per share.

The UK-headquartered firm also plan to raise around £29m by issuing 48,394,666 new Ordinary Shares also at €0.69 (£0.60) per share in order to fund the majority of the acquisition.

"The acquisition of PhD is highly complementary, doubles the size of our business and accelerates our ambition to become a global leader in premium performance nutrition,”​ said Stephen Moon, SiS’ chief executive.

“It is a compelling combination that will deliver a wider product offering, including premium protein, provide broader consumer reach and greater international presence, and dovetails our respective strengths in retail and e-commerce channels.”

In outlining its reasons for the purchase, SiS said it offered “the opportunity to acquire an innovative brand with a premium position in the protein market”.

“Protein is becoming increasingly important to endurance athletes and that SiS' protein product offering, which currently accounts for c.12% of SiS' revenue, is currently sub-scale.”

SiS retail channels

SiS’ current protein product range are a major part of the firm’s offerings that also include  SiS GO, comprising of energy powders, isotonic gels and energy bars and SiS HYDRO, comprising hydration tablets.

The firm also make available SiS REGO, a range of protein-based recovery powders and bars as well as SiS Athlete Health, comprising a range of supplements including fish oils and vitamins.

These products are sold through a range of retail channels, including specialist sport retailers, major grocers, high street retailers and e-commerce websites.

In looking to boost their protein offerings, SiS are looking to tap into the gains PHD have made in making retail a core sales channel, which represented 79% of revenue for the year ended August 2018 (FY18).

PhD also maintain long-term relationships with major UK retailers including Holland & Barrett, Sainsbury's, Tesco and ASDA as well as with UK specialist retailers and online wholesalers.

Online trading has proved successful with its relationship with Amazon resulting in increasing revenue growth, representing 16% of revenue for FY18.

The firm also utilise Amazon's fulfilment services with products distributed via Amazon's logistics network. Revenue from PhD's website represented 5% of revenue for FY18.

“The acquisition is expected to have an immediate positive impact on revenue with PhD expected to deliver mid-teen percentage revenue growth in the first full year following completion,”​ SiS said.

“As part of that growth, SiS expects to boost PhD's online sales by utilising SiS' existing platform and capabilities.

“The Directors believe that PhD could achieve an additional £4.0m to £7.5m of revenue from PhD.com over the first full three financial years following Completion.”

About PhD

SiS also plans to extend PhD's reach into international markets where SiS already has a strong foothold including the United States (which is the largest protein market globally), as well as Italy and Australia.

Founded in 2005, UK-based PhD is now considered a premium protein brand. For the year ended August 2018, PhD reported revenues of £20.8m and adjusted EBITDA of £2.8m.

With an emphasis on protein powders, PhD has recently focused on protein bars. For the year ended August 2018 the product mix was 72% protein powders and 21% protein bars with the remaining 7% represented by other products such as protein flapjacks and drinks.

Since inception, PhD has adopted an outsourcing manufacturing model. The firm procures whey from major European dairies and arranges for its shipment direct to PhD's co-manufacturing partner.

“Operating in a rapidly developing market, we see this transaction as an important step towards winning on the global stage,” ​said Moon.

“With the clear synergies and growth prospects of the combined group we anticipate delivering strong returns."

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