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Bayer AG agreed to buy Utah's Schiff Nutrition International Inc. for $1.1 billion to add a faster- growing vitamins and nutritional supplements business to the German drugmaker's consumer-health unit.
The deal marks the third billion-dollar acquisition of a state-based company this year. Earlier, Blackstone agreed to buy Vivint for $2 billion, and Permira Funds said it would buy Ancestry.com for $1.6 billion.
Schiff investors will receive $34 a share in cash, Bayer said in a statement Tuesday. The price is 47 percent above Schiff's closing level Oct. 26, the most recent day of stock trading in the U.S. Bayer also said its third-quarter profit rose 2.2 percent.
"Schiff has a 75 year heritage of providing consumers with quality nutritional products," Tarang Amin, president and CEO of Schiff, said in a prepared statement. "We are focused on building premium brands and leading innovation. We believe Bayer is well positioned to take our leading brands to the next level."
Schiff sells its brands primarily through retail outlets, with Costco and Walmart its largest customers.
The sale illustrates how mainstream food and pharmaceutical companies are moving into nutritional supplement and health food areas traditionally the venue of smaller companies, including many in Utah.
Bayer will strengthen its U.S. consumer-health unit with the Salt Lake City-based business. Signed about six weeks after Bayer agreed to buy Teva Pharmaceutical Industries Ltd.'s animal-health business, the deal fits Bayer's strategy of building its life sciences unit with small- and midsized acquisitions, CEO Marijn Dekkers said.
"These are two of the areas that we are very committed to growing, both organically and with these bolt-on acquisitions," Dekkers said in a Bloomberg Television interview.
Schiff sales in the year ended May 31 totaled $259 million. The company said last month that sales this fiscal year would increase by 43 percent to 46 percent after its acquisition in April of Airborne, the cult cold-prevention remedy touted by Oprah Winfrey and originally marketed to airline passengers.
Schiff also makes Tiger's Milk nutrition bars, Omega-3 product MegaRed and Move Free, a pill for joints. Schiff, which during its 2011 fiscal year generated revenue of $214 million, has 414 employees.
The Utah company won't seek a competing offer, although it has the option to review unsolicited bids until Nov. 28, Schiff said in a regulatory filing. Chairman Eric Weider's company Weider Health and Fitness, which owns a controlling stake in Schiff, agreed to the deal, according to the filing.
"Nutritionals are a reasonably fast-growing area," said Alistair Campbell, an analyst at Berenberg Bank in London who recommends buying Bayer stock. "It broadens their product line."
The deal is expected to close by the end of 2012.
Schiff declined 0.4 percent, to close at $23.19 on the New York Stock Exchange Oct. 26. Trading was closed Monday and Tuesday in the U.S. because of Hurricane Sandy. TPG, the Fort Worth, Texas-based buyout firm, owns 34 percent of Schiff's shares, according to data compiled by Bloomberg.
In 2010, Schiff sold 25 percent of its shares to the Texas private-equity firm, TPG Growth. Schiff exchanged 7.48 million shares from Weider Health and Fitness, its 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.
The purchase announed Tuesday, including net debt, values Schiff at 17.8 times this year's estimated earnings before interest, tax, depreciation and amortization. Buyers have paid a median 16.9 times profit for acquisitions of vitamin companies over the past five years, according to data compiled by Bloomberg.
The purchase price is based on 31.1 million shares outstanding. Bayer also is assuming $122 million in net debt.
Growth in the health and crop-chemical business helped push earnings up in the third quarter, Bayer said in a separate statement. Earnings before interest, taxes, depreciation, amortization and special items increased to 1.85 billion euros ($2.39 billion) from 1.81 billion euros a year earlier, Bayer said.
Schiff Nutrition International Inc.
What does it do? • Manufacturers and markets vitamins and other nutritional products
Headquarters • Salt Lake City
Annual revenue (2011) • $214 million
Employees • 414
Other big deals in Utah
Blackstone agrees to buy Vivint, 2012, $2 billion
Adobe Systems acquires Omniture, 2009, $1.8 billion
Permira Funds agrees to buy Ancestry.com, 2012, $1.6 billion
Novell acquires WordPerfect, 1994, $1.4 billion
Symantec acquires Altiris, 2007, $1 billion
Global Payments Inc. agrees to buy Accelerated Payment Technologies, 2012, $413 million
Cephalon acquires Anesta, 2000, $340 million
Watson Pharmaceuticals acquires Theratech, 1999, $300 million