4Health and Irwin Naturals in $79 Million Merger
Published: Saturday, November 01, 1997
Under the tentative merger terms, Irwin Naturals will become a wholly owned subsidiary of HHHH in exchange for 15.75 million shares of 4Health stock valued at $5/share.
The merger is expected to be a tax-free transaction and approved as a pooling of interests. Analysts have termed the tentative agreement a reverse merger because Irwin Naturals will receive more of HHHH’s stock than is currently outstanding.
Industry sources estimate Irwin Naturals’ sales at between $18 million and $20 million, making the company’s purchase price about four times sales. Some analysts believe that price is high but also say that Irwin Naturals has a strong brand name in its Linus Pauling Vitamins line and a reputation for innovative packaging.
Irwin Naturals’ President Klee Irwin says the price is not unreasonable, “based on our profits and vertical growth trajectory. We are unusually profitable,” he says.
HHHH, which went public in July 1996 as a result of a merger with Salt Lake City-based Surgical Technologies, has been financially troubled.
“Our last quarter of 1996 and the first two quarters of this year were hard for us, but we’ve cut expenses and sales are improving,” Pika Fisher, HHHH director of investor relations, says.
HHHH reported sales of $3.4 million in 2Q97, down from revenues of $8 million in 2Q96.
4Health’s herbal and nutritional supplements are sold under the Nature’s Secret, Harmony formulas, and 4Health brands in both mass market and natural foods retail outlets.
Irwin Naturals sells in the same markets but also has significant overseas sales. Its natural weight-loss product, System 6, is the top seller in both Japan and Russia. Irwin Naturals are top sellers domestically at General Nutrition Centers (GNCI) and Wal-Mart, according to Irwin.
Irwin says merging the two companies will benefit shareholders by the obvious consolidation of overhead costs but also because of synergies between himself and HHHH President Lindsey Duncan, a nutritionist who founded the Home Nutrition Clinic of Santa Monica.
“From a formulating and figurehead perspective, he shows we have the ability to create proprietary formulations. I bring the marketing and business side,” Irwin says.
Neither company will comment on whether the merged company will be located in California or Colorado.
HHHH company press releases say the merger is expected to be final in mid-December.