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Salt Lake City's Schiff Nutrition International is on the prowl for new acquisitions after selling 25 percent of its shares to a Texas private-equity firm led by a name familiar to the nutritional supplements industry.
TPG Growth, a part of TPG Capital of Fort Worth, exchanged 7.48 million shares from Weider Health and Fitness, Schiff's majority owner, for equity in the Texas company in a deal valued at $48.8 million, according to a filing with the Securities and Exchange Commission.
William McGlashan Jr., managing partner of TPG Growth, is known in the industry as co-founder of Pharmanex Inc., which was sold to Nu Skin International in the late 1990s. He becomes a member of Schiff's board, along with TPG managing partner Matthew T. Hobart.
Schiff President and CEO Bruce Wood said TPG approached his company about a deal. TPG hopes to combine its experience in capital investments and in the health industries with Schiff's record of profitable growth. The deal signals a renewed strategy of growth through increased sales of existing or new products, and through acquisitions of other companies in the supplements industry, Woods said in an interview Monday.
"The acquisition opportunity is there. We've certainly signaled our interest in it in the past, and I think that interest will only grow with the presence of TPG on our board."
TPG representatives declined a request for an interview about the deal. In a statement announcing the sale on Friday, McGlashan said, "We believe Schiff is an effective platform for growth that can take advantage of industry consolidation and excel in new product development in an expanding category."
McGlashan, a founding partner of TPG Growth, was chairman and CEO of software company Critical Path. He also was the co-founder and CEO of the venture capital firm Vectis Group and a senior associate with Bain Capital.
Weider Health President and CEO Eric Weider will continue as chairman of Schiff Nutrition, the maker of vitamins and other health products. Weider Health, of Woodland Hills, Calif., still owns about 25 percent of the fully diluted outstanding shares and retains 78 percent of the voting power on the board, according to a news release.
Weider Health and TPG agreed to vote the same way on major issues affecting Schiff, including dividends and any stock repurchase proposals.
The agreement also specifies an endgame for TPG's investment. Weider Health has agreed that beginning on the fifth anniversary of the deal, it will support a sales process for all or most of the shares of Schiff.
Schiff's shares closed Monday on the New York Stock Exchange at $8.15, or up 7 cents from Friday when the deal was disclosed.
Schiff Nutrition International
What • Manufactures and sells vitamins, and nutritional bars and supplements
Where • Based in Salt Lake City
Brands • Schiff, Move Free, MegaRed, Tiger's Milk
Sales • Retail partners include Costco, Sam's Club, Wal-Mart, Target, Walgreens, Rite Aid, Fred Meyer, Kroger and Safeway. Costco and Wal-Mart accounted for 72 percent of sales in the 2010 fiscal year
Employees • As of May 31, 464 — 195 in management, sales, purchasing, logistics and administration, and 269 in manufacturing
Profits • Net income in fiscal 2010 was $18 million on sales of $204 million