Sample Essay

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The acquisition of General Nutrition Companies (GNCI) by Royal Numico, N.V. this month could be the start of a far-reaching consolidation in the troubled nutritional and natural products industry… Midsized firms with revenues of $100 million to $750 million, such as Rexall Sundown, Twinlab, Nutraceutical International, NBTY/Nature’s Bounty and Weider Nutrition, are possible acquisition candidates, given the generally low valuations accorded to nutrition and natural products companies…a product glut at retail has led to disappointing sales and earnings for a number of industry leaders, with nutrition stocks badly lagging the overall market.” (Product glut 1999)

These are some of the headlines that were circulating in 1999 preceding Royal Numico’s acquisition of Rexall Sundown. Clearly the lagging market was in indicator of expanding internationally and to earn a higher market share.

“Major baby-food supplier Royal Numico said it will pay $1.75 billion in cash for Pittsburgh’s General Nutrition Companies (GNC). Executives of the Dutch group said the merger would result in the world’s largest company devoted exclusively to nutrition. GNC, which operates 4,000 stores in the US and other countries, announced last month it was buying an 8 percent stake in drugstore.com, an online prescription retailer.” (Business & Finance 1999) The large summed acquisition clearly highlighted that Royal Numico saw many benefits especially when “General Nutrition’s board of directors has unanimously approved the merger agreement in which Royal Numico will pay $25 per share for all outstanding shares of the company in a transaction valued at about $2.5 billion.” (Matta 1999) For Numico this acquisition meant two things: a higher market share that would a leading position in the market and expanding the product line with GNC using research and development. (Eppinks 728)

Numico followed the eight successful steps of acquisition when it went after GNC. It set certain goals, evaluated target markets, analyzed results and in the end ended up accomplishing what it was after: “As a result of intensive active component research development, Numico has developed a range of specialized nutritional supplement products. The acquisition of GNC provides Numico with the world’s leading brand and the largest distribution network in the US to sell these products without significant additional marketing expenses.” (Eppink 729)

“ROYAL NUMICO NV, a Dutch specialty foods company, will acquire Rexall Sundown Inc., a major US manufacturer and marketer of nutritional supplements and consumer health products. The transaction is valued at roughly $1.8 billion, or $24 per share, including the assumption of about $114 million of Rexall Sundown’s net debt and the value of its outstanding stock options.” (Mirasol 2000) According the Numico the acquisition would help the company penetrate the US market through dietary supplements and “strengthen its position as the global leader in specialized nutrition products.” (Mirasol 2000) This acquisition was the third one on Numico’s list and gave it the title of “the world’s largest nutritional supplements company.” (Mirasol 2000) The acquisition was finally made for “2.7 times sales, or $1.77 billion.” (Cohen 2002)

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