Hain Celestial (
) kept up its hearty appetite for overseas buys last month with a
deal that should boost its presence in the United Kingdom.
Hain Celestial Group kept up its hearty appetite for overseas
buys last month with a deal that should boost its presence in the
United Kingdom, where the natural and organic foods powerhouse
recently has stepped up expansion.
Hain agreed to buy Britain's Premier Foods' portfolio of jams
and spreads in a stock and cash deal valued at roughly the
equivalent of $320 million, the company said Aug. 22. That same
day, Hain served up fourth-quarter results that topped views for
the seventh straight quarter and gave an upbeat forecast for the
new fiscal year.
Investors cheered the news. On Aug. 23, Hain's shares surged
The Melville, N.Y.-based Hain is the largest manufacturer and
marketer of natural and organic food and personal care products
in the U.S., which it also sells in roughly 50 other countries.
Its well-known brands include Celestial Seasonings teas, Earth's
Best baby food, Health Valley soups and cereal bars, and Terra
Founder and Chief Executive Irwin Simon has kept Hain on a
steady diet of acquisitions with close to 30 buys since its start
in 1993. His strategy? Acquire smaller entrepreneurial companies
that are a strategic fit with Hain's business, but need to be
taken to the next level, put them together under one umbrella
company, and use Hain's wherewithal and expertise to manage and
build their brands, Simon told IBD.
The deal to buy Premier's market-leading packaged grocery
brands, such as Hartley's jams and Sun-Pat peanut butter, should
add to Hain's already healthy financial prospects.
The acquired business posted $250 million in sales in its last
fiscal year. Hain estimates the deal, expected to close by the
end of October or early November, should post sales near $180
million during the eight-month period from closing to June 30,
2013, the end of Hain's fiscal year. Hain expects the deal to add
25 cents to EPS before acquisition-related charges. The estimates
will be updated upon closing.
The acquired business should bring a lot to the table as Hain
moves to build muscle in the U.K.
"There's a big opportunity in the U.K. to do what we did in
the U.S.," said Simon. "We felt the Premier business would give
us the infrastructure to take some of Hain's products into the
U.K. in a bigger way. This gives us scale."
He says the buy would position Hain among the 40 largest food
and beverage companies in the U.K. Hain has a European business
based in Belgium that sells into Europe. Simon expects to use
this operation to expand some of Premier's U.K. grocery products
into the rest of Europe.
On the product front, the acquired Premier brands may not be
the healthiest products, but they're well known. And Hain will
work to change some of the ingredients to make them healthier so
they'll fit into Hain's mix, says Simon.
The proposed buy would mark Hain's third acquisition in the
U.K. in the past several months.
In November, it acquired Daniels Group, a marketer and
manufacturer of chilled natural foods in the U.K. Hain paid $230
million in cash plus an unspecified earn-out for the Leeds,
England-based company, which had annual sales of $280 million at
the time of the buy.
At the time Daniels caught Simon's eye, Hain was struggling in
the U.K., without a lot of brands and no scale, says Simon.
"Then came along this great acquisition -- Daniels," he
Why was it great? Its sales were substantial, and its products
fit into Hain's sweet spot, he says. Daniels' lineup of fresh and
natural foods includes the Johnson Juice Co., the No. 1
fresh-squeezed orange juice brand in the U.K. and the New Covent
Garden Soup Co., the No. 1 fresh chilled soup brand.
In May, Hain acquired Ireland's Cully & Sully for an
unspecified amount. The firm manufactures and markets chilled
soups, savory pies and hot pots.
Piper Jaffray analyst Sean Naughton says Hain's strategy of
acquiring natural and organic brands has worked to the company's
"The company has often times been able to purchase smaller
brands and use its scale and relationships with retailers at the
distribution level to expand the growth of these brands more
quickly than if they stayed as independent companies," he
This strategy has enabled Hain to continue to grow organically
at a very healthy rate, he adds.
Hain has posted eight straight quarters of double-digit sales
and earnings growth. Sales have grown by double-digits in all but
two quarters during the same period. In the most recent fourth
quarter, earnings climbed 31% to 47 cents a share. Sales rose 22%
to $350.8 million.
"Our consumption was up tremendously," said Simon.
Hain Celestial U.S. saw its consumption rate rise 10%, vs. a
Naughton says Hain, the largest pure-play organic and natural
products company in the U.S., is capitalizing on the secular
trend of more people going in for this product category.
Hain enjoys very wide product distribution at a number of
retailers, including giant natural and organic foods grocerWhole
Foods Market (
), its largest customer, discounters such asTarget (
), warehouse clubCostco Wholesale (
) as well as supermarket chains and independent grocers.
Simon says while Hain has the financial ability to do more
acquisitions, his No. 1 priority is running the current business
rather than looking for buys. He sees potential for a lot of
expansion and distribution growth for Hain's current product line
in the U.S. Healthy eating, he says, is not a fad. And it will
become a bigger part of life as retailers, such as Whole
), Costco and conventional supermarkets carry more and more
Analysts surveyed by Thomson Reuters expect Hain's fiscal 2013
earnings to rise 31% to $2.43 a share. They see a 16% increase in
"We feel very bullish about the case for continued growth in
organic and natural foods and products," said Naughton.
Naughton's recent survey work shows consumers want to continue
to spend on organic and natural products.
In a June survey, Hain's biggest customer, Whole Foods, was
voted the No. 1 destination for organic foods. Grocer Trader
Joe's and supermarket chainsSafeway (SWY) andKroger (KR) also
offer large assortments of Hain's food and household