Hain Celestial Buys Imagine Foods

The Hain Celestial Group Inc. (NasdaqNM: HAIN), the industry's largest natural and organic foods company, has purchased the privately held, San Carlos, Calif.-based Imagine Foods Inc., a maker of soy and rice milks, organic soups and broths, and organic frozen desserts, according to a Hain company announcement on Dec. 2. The purchase price was approximately $52 million, including approximately $47 million in cash and approximately $5 million in stock, according to analysts Carole Buyers and Edward Aaron of RBC Capital Markets.

Since Imagine saw revenue of approximately $70 million in FY01, the price is about 50-percent less than the average sale price for food and beverage companies. Usually companies in this sector sell for 1.2 times their annual revenue, according to Jon Fox, research associate for Boston-based investment firm Adams, Harkness & Hill.

Hain's projects that the acquisition will result in additional FY03 earnings of $.02 - $.03/share and $.08 - $.11/share for FY04. Last month, Hain reported 1Q03 earnings of $.14/share on net income of $4.7 million.

“While we are pleased with the implications to earnings, we are somewhat concerned with the increased exposure to the aseptic beverage category,”state Buyers and Aaron in a Dec. 3 report. “We estimate that Hain now derives nearly 20 percent of sales from aseptic beverages, a category that is declining 12 percent in the mass market and 3 percent in the natural foods channel, according to SPINS.” SPINS is a San Francisco-based market research company. The analysts say that they are cautiously maintaining their previous earnings estimates for Hain.

“The acquisition of Imagine significantly enhances our capabilities on several strategic fronts simultaneously. In non-dairy beverages, Imagine will strengthen our offering to our natural and retail customers. With Westsoy, Rice Dream, the rice milk category leader, and Soy Dream, we will bring increased scale to both the aseptic aisle and the refrigerated non-dairy beverages section,” states Hain CEO Irwin Simon in the announcement. “In the overall soup category, we will also have increased scale from the combination of Health Valley soups and Imagine Organic aseptic soups and broths, an excellent brand growing at double-digit rates. Additionally, Imagine Natural Organic soups give us a much stronger foothold in ready-to-eat soups.”

Robert Nissenbaum, Imagine Foods CEO and founder, will join Hain in a yet-undisclosed capacity.