Ryan Drexler, a former senior executive and equity owner of
market-leading Country Life Vitamins and holder of 341,000 shares,
or 3.1% of the outstanding common stock of Nutraceutical
International Corp. (NasdaqGS: NUTR), today announced his proposal
to acquire all of the outstanding shares of Nutraceutical
International Corp. (NasdaqGS: NUTR) in a negotiated all-cash
transaction of $10.75 per share.
In his letter to the Board, Mr. Drexler wrote: “…I believe the
company is sorely underperforming and in dire need of management
direction and expertise. Twice before I have reached out to the
board in an effort to find a mutually beneficial path toward
unlocking value for all
Nutraceutical shareholders and twice before I have received cursory
rejections. This is in spite of the fact, known to management, that
I personally have a long track record of success as an executive
and equity owner in the nutritional supplement and natural product
industry.
“I am reaffirming in this letter that I am prepared to
immediately negotiate an all-cash transaction at $10.75 per
share, the price that I previously proposed to the board, which
could possibly be increased following completion of due diligence.
This proposal allows holders to immediately realize value in what
is currently an illiquid holding. I encourage the board to support
my proposal as what it is: in the best interest of Nutraceutical
shareholders, customers and employees.”
Prior to selling his family company to Kikkoman Corporation in
2007, Drexler spent 15 years as a senior executive at Country Life,
where he successfully created new brands, developed strategic
objectives and led acquisitions. Country Life is a market leader in
the nutritional supplements and natural products industry.
Mr. Drexler’s Tuesday letter to the Nutraceutical Board of
Directors follows:
August 18, 2009
Board of DirectorsNutraceutical International Corp.1400 Kearns
Boulevard, Second FloorPark City, Utah 84060
Gentlemen:
As owner of approximately 341,000 shares, or 3.1% of the
outstanding common stock, of Nutraceutical International Corp.
(“Nutraceutical” or the “Company”), I believe the company is sorely
underperforming and in dire need of management direction and
expertise.
Twice before I have reached out to the board in an effort to
find a mutually beneficial path toward unlocking value for
all Nutraceutical
shareholders and twice before I have received cursory rejections.
This is in spite of the fact, known to management, that I
personally have a long track record of success as an executive and
equity owner in the nutritional supplement and natural product
industry.
I am reaffirming in this letter that I am prepared to
immediately negotiate an all-cash transaction at $10.75 per
share, the price that I previously proposed to the board, which
could possibly be increased following completion of due diligence.
This proposal allows holders to immediately realize value in what
is currently an illiquid holding. I encourage the board to support
my proposal as what it is: in the best interest of Nutraceutical
shareholders, customers and employees.
As previously noted, a substantial portion of the equity to
finance this transaction will come from me personally – a sign of
my belief in Nutraceutical’s long-term potential under the right
leadership and oversight. The remainder of the transaction will be
funded through other sources of equity and debt, for which I have
received preliminary indications of interest.
The nutritional supplement and natural product industry faces
many challenges in the current economic climate. In order to
successfully compete, the company must be managed to its full
potential, something I strongly believe is not being done now. For
example:
- Despite more than 20
acquisitions by Nutraceutical over the past decade, a single brand
comprises 65% of the company’s annual sales – and just four of the
company’s 29 brands account for 92% of sales;
- Revenues grew just 12.6% from
the 2005 fiscal year to the 2008 fiscal year – a period when the
overall market for nutritional supplements and natural products
rose 32%;
- Although the stock price has
risen since my initial private offer in July – and the company is
embarking on a buyback program – Nutraceutical shares still trade
at less than half their 2004 peak.
Nutraceutical has the opportunity to increase revenue by more
effectively nurturing and developing its range of brands and
products. Instead, Nutraceutical management has grown overall sales
simply by acquiring smaller competitors – essentially buying
revenue. Even then, its track record has been less than stellar as
individual brand revenues have fallen dramatically following their
absorption into Nutraceutical.
As a senior executive and equity owner of Nutraceutical
competitor and industry leader Consac Industries, Inc. (also known
as Country Life Vitamins), I developed and implemented new brands
and oversaw an acquisition program that allowed products under our
umbrella to find new customers and flourish. I left Consac in 2007
only after my family successfully sold it to Kikkoman Corp.
I am pleased to make this proposal for the benefit of all my
fellow shareholders and I believe they will find it attractive. I
am committed to completing this transaction and hope that the Board
of Nutraceutical will work cooperatively to conclude a transaction
that is in the best interest of all shareholders.
Very truly yours,
By: /s/ Ryan DrexlerRyan
Drexler
The full text of the letters referred to above is as
follows:
July 2, 2009
Board of DirectorsNutraceutical International Corporation1400
Kearns Boulevard, 2nd FloorPark City, Utah 84060
Gentlemen:
I am writing to you to open a dialogue regarding the ways in
which Nutraceutical International Corporation (“Nutraceutical” or
the “Company”) and its stockholders may be able to receive fair
value for their shares in an unstable market environment. I believe
that the nutritional supplement and natural product industry face a
difficult situation due to the economy and continued challenging
and volatile financial markets. I believe that based on my unique
expertise and background, I can improve the performance of the
Company and take the Company on a new course.
I regret that I have been unable to make contact with Mr. Gay,
despite many attempts, in order to discuss my ideas and plans. I
feel that my ideas and the opportunities at hand are compelling,
and therefore I am presenting them to you in this letter.
As you may know, I have been immersed in the nutritional
supplement and natural product industry for my entire career,
having been a senior executive and equity owner in the industry for
over 15 years. I was President of Consac Industries, Inc., also
known as Country Life Vitamins, a market leader in this industry. I
left the company only after we successfully sold to Kikkoman
Corporation in 2007. While I was involved in all aspects of the
operations of Country Life, in particular I developed a vision for
the industry founded on a belief in a holistic approach to health,
fitness, diet, and well being, as a matter of lifestyle. In my role
as a senior executive I developed and implemented the vision,
strategic goals and objectives of the company, created the sports
and fitness brands, and actively pursued our acquisition strategy.
Country Life was and is known as a successful player and a paradigm
for success in the industry. As an industry participant and since
we sold Country Life, as an interested observer and analyst, I have
developed a vision and strategy for maximizing opportunities and
value in the industry.
I have a deep respect for Nutraceutical that I am sure that you
share. At the same time I see much opportunity not yet seized. The
path, I believe, involves innovation in marketing programs and
strategy, analysis, refinement and optimization of brands, and a
re-assessment of product scope with a view to cross-selling and
opportunities for synergy. Layered, of course, on this view of
industry challenges and opportunities, are the financial markets
and the difficult straits in which Nutraceutical’s stockholders
find themselves. The markets in general and for Nutraceutical in
particular remain volatile. Trading in your shares is so illiquid
that quoted prices are only an illusory reference point for your
stockholders; there is no meaningful liquidity.
I am prepared to provide a definitive offer to acquire all
outstanding shares of capital stock of Nutraceutical. My advisors
and I have dedicated a substantial amount of time and resources
evaluating Nutraceutical. I believe that the current market price
is substantially indicative of a fair valuation of the Company.
However, the stockholders do not have an ability to realize such
value. I am prepared to make a full cash offer at a fair price to
your stockholders.
I have identified the sources of equity and debt financing
needed and have received preliminary commitments that it is
available for this transaction.
My strong preference is to consummate the acquisition in a
friendly, collaborative manner and work with the Company and the
Board of Directors. I believe that moving quickly to negotiate and
conclude the proposed transaction is in the best interest of all
parties.
I do not intend to disclose this letter or my proposal to the
public at this time. However, if we are not able to enter into a
dialogue to consider my offer, then it may become appropriate for
me to evaluate other approaches to bring this before the
Nutraceutical stockholders.
I urge you to consider my proposal carefully and respond to me
as soon as possible to schedule a time and place to meet. My legal
and financial advisors are prepared to meet with the Company’s
advisors immediately. I look forward to hearing from you soon.
Very truly yours,
By: /s/ Ryan DrexlerRyan
Drexler
July 9, 2009
Ryan Drexler
RE: Your Letter Dated July 2, 2009 to our Board of Directors
Dear Mr. Drexler:
Your letter to our Board of Directors has been referred to me
for a response. While we appreciate your interest, Nutraceutical is
not for sale at this time.
Sincerely,
NUTRACEUTICAL INTERNATIONAL CORPORATION
By: /s/ Stanley E.
SoperStanley E. SoperVice President, Legal Affairs
cc: Sol Lipshitz, Anchin Capital Advisors, LLC
July 15, 2009
Board of DirectorsNutraceutical International Corporation1400
Kearns Boulevard, 2nd FloorPark City, Utah 84060
Gentlemen:
I was disappointed by the response I received from your legal
representative dated July 9, 2009 to my earlier letter. I am
writing this second letter to again express my seriousness with
respect to providing a definitive proposal to acquire all the
outstanding shares of the capital stock of Nutraceutical
International Corporation (“Company”).
I strongly believe the Company is not being managed to its full
potential and that, therefore, its shareholders are unable to
realize the true value of the Company. As mentioned in the previous
letter, I have over 15 years experience in this industry and
successfully lead a major competitor of the Company. I know what it
takes to maximize value in this industry. The Company, although
performing well, has primarily grown sales through acquisitions,
not organically. The Company has many underperforming products
acquired via acquisitions. This is evidenced by the fact that 92%
of sales are comprised of four brands, with one brand contributing
65% of sales. I believe that a strategically different marketing
campaign and brand awareness programs would help drive the growth
of the Company. These are just a few of the strategies I have to
maximize the Company’s value through the existing brands and
product lines.
I believe it is time for the Board of Directors to consider and
move forward with a transaction that will enable the shareholders
to realize the true value of the Company. I am fully prepared to
make an offer of $10.75 per share for all the outstanding shares of
the Company. As mentioned in the previous letter, I have identified
the sources of equity and debt financing needed, and have received
preliminary commitments for this transaction. In addition, a
significant amount of the equity will be funded by me.
Again, I urge you to consider my proposal carefully; I am
prepared and willing to immediately engage in private discussions
about the Company, its strategy and potential transactions that
would unlock value for the shareholders. However, because of the
great importance that I place on this opportunity – not just for
me, but for all the shareholders, I am prepared as a next step to
take my proposal directly to the public shareholders of the
Company. I ask you to respond to me within the next five business
days from the date of this letter.
Very truly yours,
Ryan Drexler
July 28, 2009
Ryan Drexler
RE: Your Letter Dated July 15, 2009 to our Board of
Directors
Dear Mr. Drexler:
The Board of Directors of Nutraceutical International
Corporation, with the assistance of its financial and legal
advisors, has carefully considered your unsolicited proposal to
acquire Nutraceutical. They unanimously concluded that your
proposal is not in the best interests of Nutraceutical’s
stockholders.
Sincerely,
NUTRACEUTICAL INTERNATIONAL CORPORATION
By: /s/ Stanley E.
SoperStanley E. SoperVice President, Legal Affairs
cc: Sol Lipshitz, Anchin Capital Advisors, LLC
This communication is for informational purposes only and
does not constitute an offer to buy any securities or a
solicitation of any vote or approval or a solicitation of an offer
to sell any securities.
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