Advanced Nutraceuticals Files for 4-Company Roll-Up IPO

PLAINFIELD, NJ—Despite the frigid climate for IPOs, nutritional supplements manufacturer Advanced Nutraceuticals Inc., based here, filed on Sept. 16 for a 5 million-share IPO, valued at $69 million. In an interesting twist, Advanced Nutraceuticals will acquire its four founding companies concurrent with, and as a condition to, the closing of its IPO.

“This type of IPO is referred to as a roll-up,” says Matthew Patsky, CFA, managing director of Adams, Harkness & Hill in Boston. “And the current market for IPOs is very difficult. It’s hard to get an IPO done now, particularly with the multiples in the industry being depressed. However, the companies here have time limitations—all the players could become free agents again and potential targets for other players. All have expressed a willingness to sell.”

Joseph Schortz, president and CEO of Advanced Nutraceuticals and president of Quality Botanical Ingredients of Plainfield, NJ, one of the four founding companies, remains confident. “We filed with the SEC because we had been planning to do so and because we believe there is an industry niche we can fill. It is our intention to bring the IPO out before the end of the year, and we think the market will strengthen,” he says. Additional founding companies include: ACTA Products of Sunnyvale, CA; Bactolac Pharmaceuticals of Westbury, NY; and Northridge Laboratories of Chatsworth, CA.

Advanced Nutraceuticals was formed to create a vertically integrated manufacturer and supplier of supplements, herbs and extracts, according to the company’s S-1 filing. “The industry is ripe for a high-quality, vertically integrated supplier,” Schortz says. “The industry has taken some hard quality-assurance-related shots recently, and rightly so. We’re part of the solution to the problems. If it’s a product that we grow, the end customer can know the origin of our ingredients back to the seed.”

Net proceeds from Advanced Nutraceuticals’ IPO will be used to pay the cash portion of the purchase price for the companies, to repay some of their debt, and for general corporate purposes, including potential future acquisitions. The offering’s underwriter, Sutro & Co. Inc. of San Francisco, has an over-allotment option for an additional 750,000 shares. Advanced Nutraceuticals plans to trade on Nasdaq under the symbol ANUI. A date for the offering has not been set.

ANUI management indicated that it will support each founding company’s internal growth plans and that ANUI plans to pursue acquisitions and to acquire or construct additional facilities, including an extraction facility. In addition to Schortz, the company’s management team includes: Gregory Pusey, chairman of the board; David Chang executive VP; and Barry C. Loder, senior VP-finance. Combined FY97 sales for ANUI were $50.8 million, and combined FY97 income was $1.4 million.