North Castle Partners Buys Stake in EAS
Published: Friday, October 01, 1999
EAS, the largest sports nutrition company in the U.S., and some say in the world, makes more than 26 nutrition products, including its well-known Myoplex line.
EAS posted total sales of about $180 million in 1998, and revenues have been growing in the double-digits annually, says Brent Knudsen, one of North Castle’s managing directors. He believes the company has the potential to become a $500 million to $1 billion business.
Supplements makers Twinlab (TWLB) and Weider (WNI) are probably the next-largest players in the sports nutrition business, says Matt Patsky, managing director of Boston-based investment banker Adams, Harkness & Hill. But each derives less than 50% of its revenues from sports nutrition products.
The amount of North Castle’s investment was not disclosed, but the private-equity firm says former EAS CEO Bill Phillips retains a significant interest in EAS. Bank financing for the deal was provided by Bank Nova Scotia, Merrill Lynch and Dresdner Bank. Advisors included Adams, Harkness & Hill.
North Castle says the investment will give EAS the capital to develop more products, expand sales to a broader consumer base and strengthen its management team.
EAS in August named sports-equipment industry veteran David Lumley to succeed Phillips. Lumley is former president of Brunswick Bicycles, a $300 million worldwide bicycle manufacturer, and former president of Outboard Marine Corp. Intl., a $900 million company.
Lumley says he was attracted to EAS because of its reputation with consumers and because of its founder, Phillips. “He is unusually talented and has a very strong connection with current [EAS product] users and potential users,” Lumley says. “From a core business standpoint, [what attracted me] was the company’s direct relationship with consumers, its founder and his creativity, and the company’s credibility and brand.”
EAS in mid-September also announced the appointment of Ted Galovan as CFO, a new position at the company.
Galovan is former CFO of Colorado Springs, CO-based Current & Paper Direct, a $250 million direct marketer and manufacturer of greeting cards and computer paper.
According to North Castle, EAS will concentrate its sales efforts on the retail channel. Toward that end, EAS has bulked up its retail sales force, Knudsen says. Currently products are sold through General Nutrition Centers, a subsidiary of Dutch-based Royal Numico (N.NUM), natural foods stores and health clubs as well as online and via catalogs.
EAS’s e-tailing website, www.eas.com, is doing about 20% of the company’s direct sales, which make up slightly less than half of the company’s total sales, Knudsen says.
North Castle is the first and only outside investor in EAS. The firm was attracted to the company because of former CEO Phillips’ vision to expand the base of so-called “sports nutrition” products users by introducing the concept of performance nutrition, Knudsen says.
“Sports nutrition per se suggests only those who participate in sports participate in nutrition. EAS is about performance nutrition and everybody wants to perform better,” Knudsen says.
It’s performance nutrition that North Castle expects will be a strong driver in the supplements market, according to Knudsen.
Patsky agrees. He believes the broader performance nutrition category is destined to include companies such as EAS but also energy-bar makers such as Balance Bar (BBAR) and San Francisco-based Power Bar, among several others.