UPDATE: July 1, 2019: Aterian Investment Partners completed the acquisition of Hain Pure Protein.
- Hain Celestial is selling Hain Pure Protein Corporation to private equity firm Aterian Investment Partners III LP for $80 million. The deal will close before the end of the fiscal year on June 30 and includes brands like Empire Kosher and FreeBird.
- This is the second divestment that Hain Celestial has announced this week. On May 6, Keystone Natural Holdings bought WestSoy plant-based food business. Financial terms of the deal were not disclosed.
- Mark Schiller, Hain's president and CEO, said in a release the divestiture is a step toward simplifying the business as the company aggressively pursues margin enhancing initiatives. "We expect the sale of Hain Pure Protein to also help improve our balance sheet as we generate cash from the sale with which we plan to use in part to pay down debt," he said.
The sale of the Hain Pure Protein marks the company's third brand sale in the last three months and the second one announced this week. The maker of natural and organic products evolved into a multi-billion dollar business, with 55 brands and related products crowded into the company's portfolio.
Faced with an unwieldy array of products — some of which are only marginally profitable — Hain launched Project Terra in 2016 to streamline its massive product portfolio and invest in its top 500 U.S. products in order to improve performance.
Months after this initiative started, Project Terra became an absolute necessity. In August 2016, the company postponed the release of its earnings report because of accounting irregularities. While the company settled charges related to these issues with the Security and Exchanges Commission in December, the former natural products powerhouse fell under control of activist investor Engaged Capital, got a new CEO, and has become seen as a perpetual takeover target. In late 2017, there were rumors Nestlé was interested — if Hain shed its poultry business.
Now that has happened, and for a good price. According to the company's most recent earnings report, Hain Pure Protein saw a 25% decrease in net sales for the third quarter, falling to $88.7 million, compared to the same time last year. While a $80 million is less than a tenth of the $820 million General Mills paid for legacy organic brand Annie's in 2014, it is still a helpful cash infusion for Hain Celestial, which reported a net loss of $65.8 million on its latest earnings report.
This is just the latest in a long chain of financial problems that have plagued the company in the last three years. Hain Celestial's lost about a fifth of their value after second-quarter results came out in February, during a quarter Schiller told analysts was "truly disappointing." The decline to $14.45 per share was the organic and natural food company's lowest price since October 2011, according to Bloomberg. At that time, MarketWatch reported that the company's shares have fallen 49% over the past 12 months.
Shares have fallen after the latest earnings report, according to a check on Friday trading, but were above $22 in the late morning.
With all the turmoil, there is a bright spot for Hain. This latest sale shows that companies are interested in acquiring brands from the company at a reasonable price. The question now shifts to whether Nestlé's interest in a full acquisition is still strong — or if someone else may step up.