According to Omega Protein, the acquisition unites two highly complementary businesses, adding immediate size and scale to the overall business through more diversified human nutrition product offerings and expanding Omega Protein's global customer reach. The deal will add to the company’s portfolio of specialty oils, essential fatty acids, specialty proteins and nutraceuticals.
Omega Protein’s business has been based on its harvest of menhaden in and near Chesapeake Bay and in the Gulf of Mexico. Sales of animal nutrition products—fish meal and fish oil—still make up the lion’s share of the business and one that has been generally profitable for the company over the years. But it’s a segment in which the company is at the mercy of external factors as far as price and supply is concerned. Omega Protein is the largest processor of fish oil based in the US, but it is a small fish in the big pond created by the Peruvian anchovy fishery, where a big chunk of the world’s supply of fish meal comes from and where the vast majority of the world’s servings of omega-3s are sourced. A sharp restriction by the Peruvian government in the amount of fish available in this fishery in the first fishing season of 2013 sent a price shock wave through the fish meal and omega-3 markets.
"Increased sales of nutritional products for direct human consumption is a key component of Omega Protein's business strategy to diversify our business model and increase growth, while decreasing our exposure to commodity based earnings volatility," said Bret Scholtes, Omega Protein's president and CEO.
In addition to the vagaries of fishing operations, Omega Protein is also subject to the varied quality of the stock itself. There is a natural fluctuation in the amount of oil each ton of menhaden contains. Deriving higher-value ingredients from that stream is a way for the company to forecast more predictable revenue numbers.
Human nutrition acquisitions
Past acquisitions in the human nutrition sphere have included Cyvex Nutrition, a supplier of specialty ingredients, and Wisconsin Specialty Protein, a whey protein producer. In late 2013 the company grouped these assets in a new division called Nutegrity.
Bioriginal started in 1993 with its first oil-based ingredient, a borage oil for dietary supplements. The company now offers a wide array of oil-based ingredients and finished supplements, including omega-3 fish oils sourced from Peruvian anchovies and krill oil sourced from Norwegian supplier Rimfrost.
For its fiscal year ended March 31, 2014, Bioriginal generated approximately $98 million in net revenues. Bioriginal will be operated as a wholly owned subsidiary of Omega Protein, and the transaction is expected to be accretive to Omega Protein's adjusted earnings in its fiscal year 2015.