Vitaco swallowed by Chinese in $314m vitamins takeover

Vitamins firm Vitaco is being swallowed by two Chinese giants in a $314 million agreed takeover, which ends its short life as an ASX-listed company and underlines the huge appetite for Australian vitamins companies and the “clean and green” brands they sell.
Vitaco, which listed on the ASX in September, 2015 after raising $232 million in a public float, will be acquired by Chinese firm Shanghai Pharmaceuticals and Chinese private equity group Primavera.

Shanghai Pharma was one of the underbidders for the Swisse Wellness vitamins business acquired by Chinese firm Biostime International in September 2015, which valued Swisse at $1.67 billion. Shanghai Pharma has annual revenues of $21.5 billion and operates 1,800 pharmacy outlets in China and plans to supercharge Vitaco’s growth plans by selling its products through those outlets.

Vitaco shareholders will be offered $2.25 per share. Vitaco, which sells vitamins brands including Nutra-Life, Wagner and Healtheries along with muscle-building protein powders and health bars under the Aussie Bodies and Musashi brands, had an issue price of $2.10 in the public float. The shares climbed by 20 per cent to $2.11 by noon on Thursday. Blackmores shares were up 3 per cent to $152.70.

Vitaco last traded on August 3 at $1.76, with the bid price at a 28 per cent premium. The offer values the Vitaco equity at $313.7 million. Vitaco shares had soared above $3 in late November, 2015.

Australian private equity firm Next Capital, which sold down from 71 per cent to 15 per cent in the public float, has agreed to back the deal, which is being undertaken through a scheme of arrangement. Shareholders will vote on the deal at a meeting likely to be held in November, 2016.

Vitaco chairman Greg Richards said the scheme “represents attractive upfront and certain value for shareholders, particularly given ongoing volatile macroeconomic conditions and regulatory uncertainty in China”.

Strong demand for Aussie vitamins 
The appetite from Chinese consumers for higher-profile Australian vitamins brands such as Blackmores and Swisse, fuelled the hotly contested auction for Swisse in September, 2015 and also pushed the share price of Blackmores through $200.

Vitaco has found the going tougher because its vitamins brands are less well-known and it is not as well advanced in its Chinese growth strategy.

The Chinese private equity firm Primavera had huge success as a pre-IPO investor in the Chinese internet giant Alibaba, which operates the Tmall and Taobao e-commerce sites in China.

Vitaco also on Thursday revealed its preliminary full-year results for 2015-16, which met its prospectus forecasts. Net revenue was $212.9 million which was up 23.5 per cent on the previous year, while earnings before interest, tax, depreciation and amortisation on a pro-forma basis was up 15.6 per cent to $23.9 million.

Vitaco also said it expected only “modest” earnings growth in 2016-17 because of higher operating costs and increased consumer marketing in China to support its main brands, and the loss of a contract.

Shanghai Pharma is listed on the Shanghai Stock Exchange. Shanghai Pharma president Cho Man said on Thursday he believed Vitaco “will play an important role in our global health and wellness growth strategy”. 

Primavera chairman Fred Hu, a former partner in Goldman Sachs’ Greater China business, said the firm was “very bullish on the growth of middle class consumption in China, and in particular the increasing demand for healthy, safe foods and nutritional products by Chinese consumers”.

Vitaco directors have unanimously recommended that shareholders vote in favour of the scheme.

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