EAS on the Auction Block

[Bryan Haycock]

Nutritional product maker EAS up for sale -NY Post
Tue Sep 7, 2004 04:14 AM ET
NEW YORK, Sept 7 (Reuters) - EAS Inc., the maker of Myoplex and AdvantEdge nutrition bars and drinks, may be sold for up to $400 million, the New York Post said, citing unnamed sources familiar with the situation.
The private equity firm that owns EAS, North Castle Partners, is actively shopping the company, with another round of bids expected this week, and hired UBS to handle the sale, the newspaper said, citing unnamed sources.

North Castle, which describes itself on its Web site as "focused exclusively on consumer businesses dedicated to Healthy Living & Aging," wants to complete the sale by year-end, the newspaper said.

EAS did not immediately return a call and e-mail seeking comment. North Castle could not be reached by phone; it did not immediately return an e-mail seeking comment. UBS did not immediately return a call.

EAS is based in Golden, Colorado. North Castle has offices in Greenwich, Connecticut and San Francisco.

Possible bidders include Hershey Foods Corp. (HSY.N: Quote, Profile, Research) , Kellogg Co. (K.N: Quote, Profile, Research) , Kraft Foods Inc. (KFT.N: Quote, Profile, Research) , Mars Inc., Nestle SA (NESN.VX: Quote, Profile, Research) , Pepsico Inc. (PEP.N: Quote, Profile, Research) and Wm. Wrigley Jr. Co. (WWY.N: Quote, Profile, Research) , as well as buyout firms AEA Investors, Blackstone Group, Harvest Partners and Ripplewood Holdings, the newspaper said, citing no sources.

Formerly known as Experimental & Applied Sciences, EAS is expected this year to generate $340 million of sales and $38 million to $40 million of EBITDA -- earnings before interest, tax, depreciation and amortization, the newspaper said.

The newspaper said North Castle late last year asked UBS to shop EAS, but tabled the auction process amid uncertainty over the U.S. Food and Drug Administration's stance on the weight-loss supplement ephedra, which makes up a small part of EAS's business.

Regulators banned ephedra in April after concluding its use posed risks of heart attacks, strokes and death.

 

[imported_dkm1987]

Quote[/b] (Bryan Haycock @ Sep. 07 2004,6:02)]$340 million of sales and $38 million to $40 million of EBITDA

With only a 11 to 12% Cash Flow margin I'd sell it also.

 

[Old and Grey]

$400 million = >10 times EBITDA. No way. Castle over paid for EAS to begin with and now wants to find a sucker to bail them out. The only real winner here was *gasp* Bill Phillips. And, interestingly, it was Phillip's use of androgens that made it possible for him to promote his company and "Body for Life" series of competitions.

 

[Ryan]

EBITDA has no value to me. There is value in this company, brand alone. The distribution network and purchase power efficiencies may make it solid bid. Wouldn't pay more than 3-4 x EBITDA (back of envelope) due to the commoditization of the product line, due diligence is very important.

A safe bet that they overpaid due to Bill Phillips smoke and mirrors factor.

 

[imported_dkm1987]

Due diligence is something that would most definately be necessary. I also agree with the multiple you stated, ten definately seems high, but I say that without looking at their Income Statements and Balance Sheets.

 

[John Galt]

Funny,
I remember exchanging letters (before e-mail was used) with Phillips when he first got MetRx and EAS going to retail the products. Back then Phosphagen was the holy grail. Amazing how things turn out, last I heard he moved to Hawaii to "retire". Now with this sale he's REALLY laughing all the way to the bank. I say good for him.