Acquisition trails continues in China for Bio-One

Continuing an agressive acquisition programme nutritional supplements firm Bio-One will expand further in China with a third acquisition in the region buying a 51 per cent stake in a Chinese herbal medicine firm in the Hebei Province heralding new opportunities in the growing Chinese market for the Florida firm.

The $9 million Chinese firm, whose name Bio-One has not disclosed, produces 170 products in five categories including large and small capacity injection - for which it has 75 per cent market share in the province, powder injection, tablets and granules.

"We are aggressively pursuingadditional synergistic candidates in China as well as in North America that meet our criteria for profitability and revenue growth," said Bio-One CEO Armand Dauplaise.

Bio-One is striving to become a leading manufacturer and marketer of brand name nutritional supplements sold through multiple distribution pipelines - a strategy dependent on successfully acquiring manufacturing, marketing and distribution companies currently engaged in various aspects of this industry. The company successfully negotiated a $30 million agreement to fund its acquisition strategy.

In a highly fragmented industry, according to Hawks Associates less than twenty companies realize annual revenues in excess of $100 million. Over 5,000 companies in this market segment are relatively small family businesses, most being first generation with annual sales of less than $25 million. These type of businesses often have limited access to capital and face illiquid exit strategies, said the investment firm. However, many of these businesses are highly profitable with EBITDA in the 15 per cent to 20 per cent range of sales. These are the businesses that Bio-One has targeted for acquisition.

Since September 2003 the firm has acquired four companies with combined annual revenue exceeding $38 million. Bio-One has also signed letters of intent to acquire ownership or majority control of two other companies with combined annual revenue of $24 million.

In March this year the firm announced a new deal - due to close in third quarter of 2004 - to acquire a 51 per cent slice of a $20 million Chinese herbal medicine company with 2004 EBITDA of $4.2 million. The following month Bio-One bought a majority control of WeiFang Shengtai Pharmaceuticals, a Shandong Province-based manufacturer and distributor of glucose that reported $16.3 million in revenue in 2003 and a net income of $2.3 million.

Industry sources pitched the US retail market for vitamins, minerals and other supplements, including sports nutrition products and nutritionally enhanced foods and diet products, at about $58 billion in 2003. Of this total, supplement sales accounted for approximately $20 billion.

Many analysts believe this consumer-directed health care expenditure will grow even faster than the 8 per cent annual growth predicted on average for the heath care industry overall, said Hawk Associates.

Growth for companies targetting this indusry reflects the consumer's growing desire for 'self-care', as well as the expanding 'third age' generation. According to a recent survey from the Consumer Health Care Products Association 73 per cent of respondents said they would rather treat themselves at home than see a doctor. In addition, it is estimated that the population of those 65 years and older will double to nearly 25 per cent of the US population by the year 2030, marking strong opportunities for industry players.

Nutritional supplement use is prevalent among the elderly. A national survey by the National Nutritional Foods Association revealed that 65 per cent of adults aged 50 or older said they consider nutritional supplements to be essential for people their age.