Nestlé to Buy Atrium Innovations for $2.3 Billion

By Ben Dummett and Saabira Chaudhuri Features Dow Jones Newswires

Nestle SA is close to buying Atrium Innovations Inc., a Canadian vitamin maker, from a consortium of investors led by private-equity firm Permira, in a deal valued at $2.3 billion, according to a person familiar with the matter.

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A deal could be announced as early as Tuesday.

LONDON -- Nestlé SA agreed to buy Atrium Innovations Inc., a Canadian vitamin maker, for $2.3 billion, including the assumption of debt -- expanding its range of consumer-health offerings as sales slow for packaged-food staples like TV dinners and chocolate-powdered drinks.

Atrium owns Garden of Life and Pure Encapsulations supplement brands and is owned by a consortium of investors led by private-equity firm Permira. It will become part of Nestlé's health-sciences arm, which makes products like meal-replacement drinks and nutritional therapies for conditions like diabetes and dysphagia.

That unit had sales of $15.2 billion last year, up 2% from the previous year. Nestlé's overall sales last year were about $90 billion, most of that from businesses like coffee, bottled water, frozen food and candy bars.

Packaged-food makers like Nestlé and Kraft Heinz Co. are being buffeted by a number of forces. Fast-changing consumer tastes have shoppers fleeing some of these companies' big brands in favor of healthier options or locally or more naturally made goods.

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Social media and e-commerce has leveled the playing field for some of these small new competitors -- making the big firms' research and development and marketing budgets less effective in holding on to market share.

Earlier this year, Nestlé abandoned its long-held annual sales-growth targets after years of missing them. A few months later, activist investor Daniel Loeb took a $3.5 billion stake in Nestlé, which makes Nescafe, Lean Cuisine and Nesquik, and demanded big change.

In response, Nestlé Chief Executive Mark Schneider has rolled out share buybacks and a formal profit-margin target. He also has said he is willing to shuffle 10% of the company's portfolio. In June, Nestlé put its North American chocolate business up for sale. The unit could bring in $3 billion, according to analysts.

But mostly, Nestlé has focused on small acquisitions and stake purchases since Mr. Schneider, a former health-care executive, took over in January. The Vevey, Switzerland-based company in recent months bought artisan coffee maker Blue Bottle, cold brew coffee brand Chameleon, and plant-based frozen foods maker Sweet Earth. It took a stake in subscriptions meals delivery company Freshly.

Greg Behar, Nestlé's head of health science, said buying Atrium would allow Nestlé to extend its product range in areas like probiotics, plant-based protein nutrition, meal replacements and multivitamins, including non-GMO, organic and natural supplements. The Wall Street Journal first reported Nestlé's plans to buy Atrium earlier Tuesday.

Montreal-based Atrium employs about 1,400 employees. Its brands -- which also include Wobenzym and Douglas Laboratories -- are distributed across more than 50 countries. Four years ago, Permira said it was buying 75% of Atrium for about 563.4 million Canadian dollars ($444 million).

The selling consortium also included a group of Quebec-based funds including the big Canadian pension fund Caisse de dépôt et placement du Québec.

Write to Ben Dummett at ben.dummett@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

December 05, 2017 13:31 ET (18:31 GMT)