SlimFast deal fails to fatten up Glanbia share price

By Geoff Percival

Glanbia has reached agreement to buy well-known weight control food brand SlimFast for $350m (€302m).

The move is arguably the Kilkenny-headquartered nutrition-based specialist food group’s highest profile acquisition to date.

However, the news failed to ignite a stuttering share price, with the Glanbia stock falling by more than 3%. It is down by close to 13% over the past 12 months.

Glanbia expects to close the deal — which will give it control of a number of companies under the SlimFast banner — before the end of the year, depending on regulatory clearances. The Irish group is buying SlimFast from food-focused US private equity firm Kainos Capital.

Glanbia group managing director Siobhán Talbot said the acquisition will also boost the group’s presence in the $8bn weight management nutrition market.

“The transaction is in line with our strategic ambition to extend the reach of our Glanbia Performance Nutrition portfolio to related customer needs,” she said.

While investors didn’t initially react positively, analysts welcomed the announcement.

“It is the first time that Glanbia has acquired a storied brand with mass awareness,” said Davy analysts Cathal Kenny and Roland French in a research note.

“We see deal logic on a number of levels — it facilitates entry into the adjacent weight management category, deepens Glanbia Performance Nutrition’s presence in the developing food, drug, mass, and club channel and up-weights its exposure to the fast-growing ready-to-drink format.”

While SlimFast is only likely to be modestly earnings accretive, adding 1%-2% to earnings, for Glanbia in the first full year of ownership, it “should be well-recieved”, according to Goodbody’s Jason Molins, due to the exposure to the lifestyle and ready-to-drink markets it provides to Glanbia.

SlimFast incurred a pre-tax loss of $12m last year, but had sales of $212m. In August, Glanbia reported a 7.3% year-on-year drop in first-half earnings.

Mr Molins also said Glanbia should have around €300m of available headroom to play with to carry out further acquisitions if it so wishes.

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