The deal, announced this morning, will see Balchem grow its Human Nutrition and Health business segment with the addition of Kappa’s K2VITAL branded synthetic vitamin K2.
“This acquisition accelerates our strategy to expand our portfolio of science-based specialty nutrients with leading positions in growing markets,” said Ted Harris, Chairman, CEO and President of Balchem.
“Vitamin K2 fits squarely with our strategic focus and our vision of ‘making the world a healthier place’.
“We believe the combining of our two companies will strengthen our scientific and technical expertise, geographic reach, and marketplace leadership while ultimately leading to accelerated growth for both companies’ portfolios.”
According to a press release, Balchem is acquiring Kappa from it's majority owner, the Verdane Edda investment fund, for an enterprise value of NOK 3.175 billion (approximately US$ 338 million).
This transaction represents an EV/EBITDA multiple of 18x based on the 2022 forecast EBITDA. Kappa’s forecast 2022 revenues are approximately NOK 500 million (approximately US $53 million) with a strong growth and margin profile.
The transaction closing is subject to the completion of customary closing conditions and will be financed through Balchem’s existing revolving credit facility and cash on hand.
There are two main forms of vitamin K: phylloquinone, also known as phytonadione, (vitamin K1) which is found in green leafy vegetables such as lettuce, broccoli and spinach, and makes up about 90% of the vitamin K in a typical Western diet; and menaquinones (vitamins K2), which make up about 10% of Western vitamin K consumption and can be synthesized in the gut by microflora.
Menaquinones can also be found in the diet; MK-4 can be found in animal meat, MK-7, MK-8, and MK-9 are found in fermented food products like cheese, and natto (fermented soybeans) is a rich source of MK-7.
Kappa, which was founded in 2006, supplies a patented, synthetic, 99.7% all-trans vitamin K2 as MK-7, with studies showing the ingredient is bio-identical to the vitamin K2 molecule found in nature.
“We are extremely excited to join Balchem, a market leader in human nutrition and health and a science-driven company that aligns well with our vision to improve the quality of life for all,” said Egil Greve, President & CEO of Kappa Bioscience, which markets Vitamin K2 under K2VITAL and a double encapsulated Vitamin K2 under the K2VITAL DELTA brand.
“Our partners can expect continued expert knowledge, scientific excellence, product safety and quality, and customer service as we further strengthen these areas together with Balchem. Our two companies are very complementary to each other.
“Balchem’s strength in the United States will further accelerate the growth of Kappa’s vitamin K2 platform in that key market. At the same time, Kappa provides Balchem with increased access to European markets. Both companies share a passion for science-based nutrition solutions while operating to the highest integrity and doing it right.”
The global market for vitamin K2 is estimated to grow at double digits rates over next few years and reach at least US$ 300 million by 2025, a spokesperson for Balchem told us.
"Balchem will continue to expand Vitamin K2 market awareness and invest in generating even more science to increase consumer awareness and industry understanding of Vitamin K2," added the spokesperson. "Balchem recently launched a consumer campaign to promote VitaCholine brand and has seen very successful results. Balchem will leverage the combined Kappa and Balchem strong B2B2C marketing and nutrition science expertise to accelerate Vitamin K2 brand awareness and market penetration.