IdeaSphere pulls Metabolife purchase agreement

By staff reporter

- Last updated on GMT

Related tags Bankruptcy

IdeaSphere has rescinded its offer to acquire the assets of
Metabolife for $23 million, claiming that the beleaguered
supplements company was not meeting its obligations under the asset
purchase agreement signed in July.

IdeaSphere (ISI) was quick to swoop in with a top dollar bid when Metabolife filed for chapter 11 bankruptcy protection in the summer. Its offer was for the company's Metabolife Ultra, Metabolife Complete, Metabolife Ultra Caffeine Free and Metabolife Green Tea Formula brands, plus a powder and tablet manufacturing facility in Orem, Utah, and a distribution center in Memphis. The sale was subject to competitive bidding at a public auction, proposed to take place this month. But in a statement issued yesterday, ISI claimed Metabolife had failed to meet its obligation to continue operations as normal. Specifically, ISI says that Metabolife had lost a number of clients in the mass retail sector, has slashed its marketing and advertising budget, and that as much as 30 percent of Metabolife had expired or would expire soon. ISI president Mark Fox said that the company plans to make a new purchase offer, this time for just $14 million. "We made a premium bid for the Metabolife assets in July because we believed they could be integrated very efficiently into our existing structure and operations, and the products were a good fit for our brand portfolio," said Fox. "However, because Metabolife has not operated its business consistent with past practices as required by the agreement, we can no longer justify the original bid, as the value of those assets has diminished considerably over the past several months." The company says that it had attempted to negotiate a restructuring of the agreement to reflect the current state of business, but that this was unsuccessful. Nonetheless, Fox said that it remains interested if an agreement on valuation can be reached. Until the ban on ephedra came into effect in April 2004, Metabolife had the reputation as one of the largest dietary supplement manufacturers in the US, largely due to sales of its ephedra product Metabolife 365. It had turned over its entire portfolio to non-ephedra products by December 2003, but in filing for bankruptcy protection it said that it had spent "inordinately large resources and time to defending lawsuits filed by ephedra product users, which costs have been a substantial burden on the company's operations". The FDA's final judgment that ephedra constitutes an unreasonable risk of illness or injury brought lawsuits raining down on the company, including the indictment of former chief executive Michael Ellis over "fictitious and fraudulent representations" to the FDA about the safety of Metabolife 365 and "corruptly endeavoring to influence, obstruct and impede proceedings" in relation to the ban. The company has also paid out damages to individuals who suffered serious ill effects from taking the supplement, including $2.4 million to Texan Rhea McAllister and $5 million in punitive damages. A Crosby woman who suffered a stroke resulting in brain damage after taking ephedra also received a $7.4 million jury award. External links to companies or organizations mentioned in thisstory: IdeaSphere

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