Blackmores splashes big in $40m buy

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This was published 11 years ago

Blackmores splashes big in $40m buy

By Madeleine Heffernan

BLACKMORES chief executive Christine Holgate said the 80-year-old natural health company was now focused on organic growth rather than more acquisitions and had defended the $40 million price tag for a long-time rival.

''This is the first big acquisition Blackmores has done in many, many years,'' referring to Sydney's BioCeuticals, which is Australia's largest supplier of supplements to GPs, naturopaths and pharmacists. Its products include protein powders, probiotics and antioxidants.

Christine Holgate, CEO and Managing Director of Blackmores.

Christine Holgate, CEO and Managing Director of Blackmores.Credit: Dean Sewell

The deal, announced this week, will make Blackmores the dominant player in the practitioner-only market, which is worth about $150 million in Australia.

''The whole vitamin category is growing somewhere around 6 per cent. It will continue to grow strongly because there's an increasing number of practitioners here and they're playing a greater part in the health agenda,'' Ms Holgate told BusinessDay.

The acquisition is priced at almost nine times last year's revenue of $4.6 million and analysts question whether Blackmores paid too much.

But Ms Holgate pointed to more expensive multiples overseas in healthcare. ''Our sector is pretty unusual. If you look at the States, there's been a number of natural health companies sold for crazy multiples like 11 times revenue, bought by Pfizer, Procter & Gamble and Nestle as the big pharmaceutical companies try and enter our space.''

Asked whether more deals were on the cards, Ms Holgate said: ''Unfortunately when you buy something, everyone thinks that you must be buying, so all day long people have been sending me ideas. I think we see a lot of growth prospects, just from growing our business.''

The deal provides diversification during a tough retail environment, in which rival brand Swisse has gained greater public profile from a celebrity - and Olympian-heavy - advertising blitz. ''They're predominantly selling grocery and they've done very well. It's just a different approach,'' she said.

Commonwealth Bank analyst Bruce Du said in a note to clients that despite facing ''increased discounting pressure from some of its larger grocery and pharmacy channel customers'', he was ''positive on the medium-term growth prospects'' for Blackmores' Asian expansion strategy. Goldman Sachs said it expected the buy to be about 2 per cent earnings-per-share accretive this financial year.

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