Martek Biosciences Corp., a Columbia-based maker of infant formula nutritional supplements, said Thursday it will pay $200 million for a consumer health and wellness product company that will for the first time help give their products a direct pipeline to store shelves.
Martek is buying Amerifit Brands Inc. from Charterhouse Group Inc., a New York-based private equity investment firm, in a deal that is being funded with $120 million in cash reserves and the rest through loans, the companies said.
Amerifit sells over-the-counter nutritional supplements, including Culturelle, a probiotic supplement and Azo, which helps relieve and prevent urinary tract infections. Martek officials said the acquisition gives them an opportunity to develop and market consumer brands for supplemental products of theirs that are currently in research and development.
Martek's scientists developed patented processes for extracting fatty acids from algae that promote infant development and adult health. Up until now, Martek's products have been added as an ingredient into products owned by other companies.
"This new capability will enable Martek to move up the value chain by getting closer to the consumer, and should result in increased revenue and gross profit opportunities," Steve Dubin, Martek's chief executive officer, said in a statement.
Analysts mostly cheered the acquisition because it showed that Martek was taking steps to diversify how it makes money. In an equity research note, analyst Tim Ramey of D.A. Davidson & Co. described the deal as "a first step" for Martek to reinvent its revenue base.
Ramey wrote that 95 percent of Martek's infant-formula ingredient sales come from contracts that expire at the end of 2011, which will likely lead to lower revenue and profit for the company as contracts get renegotiated in coming years.
Bentley Offutt, of Baltimore-based Offutt Securities, said Amerifit will give Martek access to an experienced sales and marketing force that has been mostly lacking from the company.
The only other acquisition that Martek had made before this was the 2002 purchase for $90 million of OmegaTech Inc., which made food and drink supplements for adults. In addition to its Columbia headquarters, Martek operates a research and development site in Boulder, Colo., and manufacturing plants in Kingstree, S.C., and Winchester, Ky.
Amerifit has about 65 employees, with its main office in Cromwell, Conn. It had $81.4 million in sales and $22.2 million in earnings before interest, taxes, depreciation and amortization for 2009. Martek, which has 585 employees, had sales of $345.2 million and net income of $40.6 million last year.
Cassie France-Kelly, a Martek spokeswoman, said there weren't any major changes planned to staffing levels at Martek or Amerifit.
She said Martek had plans to introduce new products under the Amerifit brand in 2011 and 2012. The company said it expected to close the sale in the second quarter this year.