Glanbia acquires Watson for US$89m, reports strong 2018 growth

20 Feb 2019 --- Glanbia has agreed to acquire Watson a non-dairy ingredient solutions business headquartered in Connecticut (US) for US$89 million (€78.65 million). Watson is presented as a highly complementary addition to Glanbia’s Nutritional Solutions business and will help broaden their capabilities in the ingredients sector. The company is a manufacturer and supplier of high-quality custom nutrient premix, bakery ingredient, edible film and material conditioning solutions for the nutrition, food and beverage, personal care and supplement industries.

Watson is a third-generation family business with an 80 year history of providing exceptional quality, capability and service to its customers.  The transaction is highly complementary, strengthening Glanbia’s capability set with microencapsulation, agglomeration, micronizing, spray drying and edible film technologies.  

The knowledge and experience of the combined R&D teams will cement Glanbia’s position as a leader in the sector, with the enhanced ability to create superior premix solutions that address the complex formulation requirements of today’s increasingly sophisticated applications.

Click to EnlargeWatson's headquarters located in West Haven, Connecticut, is home to the modern 85,000 and 50,000 sq. ft. facilities of their Manufacturing, Warehouse, Analytical and Research & Development Departments. “We are excited to welcome the 300 employees of Watson with their established reputation of expertise, technical capability and commitment to excellence,” said Brian Phelan, CEO of Glanbia Nutritionals. “The customers of both organizations will stand to benefit significantly from the combined capabilities that the two teams now bring together.”

Glanbia Nutritionals’ custom nutrient premix production footprint now extends coast to coast in the US with facilities in California, Missouri, Illinois, and Connecticut to better serve customers across the region. The US presence is supplemented by facilities in Germany and China to provide global scale and solutions to our customers.

News of the acquisition comes as Glanbia plc revealed its results for the full year 2018. Earnings per share rose 4.5 percent on a reported basis last year, but were up 9 percent at 91.01c when currency fluctuations were stripped out.

Glanbia Performance Nutrition (GPN) delivered revenue growth of 9.5 percent constant currency (up 5.2 percent reported) with like-for-like branded volume growth of 9.2 percent and EBITA of €173.1 million, a 6.7 percent increase on prior year, constant currency (up 2 percent reported).

Glanbia Nutritionals (GN) revenue declined 0.6 percent constant currency (down 4.7 percent reported) and delivered EBITA of €111.8 million, a 3 percent increase on prior year, constant currency (down 1.5 percent reported). Volume growth in GN Nutritional Solutions was 8.5 percent in 2018.

In November 2018, Glanbia completed the acquisition of SlimFast for US$350 million (€308 million), a complementary brand within the GPN portfolio. At the time, Glanbia said that it plans to operate SlimFast within its Performance Nutrition segment of the business which plays into global consumer trends focused on convenient formats and snacking. 

Joint Ventures reported share of profits after tax (before exceptional items) of €45.3 million, up €2.5 million on the prior year. A number of JV investments were announced during 2018.
Commenting on the results, Siobhán Talbot, Glanbia’s Group Managing Director, said: “I am pleased to announce 9 percent growth in pro-forma adjusted earnings per share, constant currency, for Glanbia for 2018. This was largely driven by strong volume growth across our business, in particular in the branded portfolio of GPN and the Nutritional Solutions component of GN. Consumer demand for our brands and nutritional ingredients remains strong underpinned by positive long-term global health and wellness trends. Glanbia also delivered a strong cash performance with an operating cash conversion rate in 2018 of 92 percent. We continue to invest in expanding our business and its capabilities and we completed the acquisition of SlimFast in November 2018.”

Talbot further noted that the company continues to drive sustainable growth and is on track to deliver on its 2022 strategic ambitions to reach €6bn.

The outlook for 2019 is positive and Glanbia expects to deliver 5 percent to 8 percent growth in adjusted earnings per share, constant currency. If the Euro:US Dollar exchange rate remains at current levels, the reported 2019 result will be 3 percent higher than the constant currency outlook, Talbot stressed.

Glanbia also announced plans to reorganize the composition of its Board of Directors during 2019 with the appointment of three new independent non-executive directors to its Board. The reorganized board will comprised 16 members; two executive directors; a group MD and a group finance director. In addition there will be six independent non-executive directors and eight non-executive directors nominated by Glanbia Co-Op.

On the matter of Brexit, Glanbia said it has been “actively preparing,” for as far as possible, for a no-deal outcome and remains very alert to the risks that may crystallize in the coming months. However, the company's direct exposure through its wholly owned business is relatively limited. “We have outlined Brexit as a risk. From our perspective, only around 3 percent of our wholly owned business is in the UK, so at a group level we are relatively well insulated from Brexit. But we do have dairy processing in our joint ventures and that is where the more significant exposure would be,” Talbot tells FoodIngredientsFirst. This is in the form of Glanbia Ireland, the company’s Irish dairy processing business and Glanbia Cheese [a mozzarella business] which has two existing plants in the UK (based in Northern Ireland and Wales). 

“We are monitoring Brexit very closely. The critical consideration is whether it will be a transitioned exit or an immediate withdrawal. A transitioned exit is by far the better option of those two scenarios, when it comes to planning. At the moment, even in a hard Brexit scenario the tariff positions aren’t clear. We would like more clarity on that,” she adds.

Yesterday, fellow Irish ingredient giant Kerry revealed its results, which were boosted by Taste & Nutrition. In terms of future prospects, Kerry is confident on its innovation pipeline and has a mitigation plan in place should a “no deal scenario” emerge on Brexit, with the Irish headquartered group highly susceptible.

But the Watson acquisition is particularly interesting amid a period of strong consolidation in the food ingredients space. Founded in 1939, Watson presents itself as “one of the highest quality suppliers of products and services geared towards enhancing human health and nutrition around the world.” Watson is put forward as “a leader” in developing quality products and ingredient systems for the food and supplement industries. Expertise in microencapsulation, agglomeration, micronizing, spray drying and film technology allows the company to develop unique formulations and products using Watson manufactured value-added ingredients.

Their headquarters located in West Haven, Connecticut, is home to the modern 85,000 and 50,000 sq. ft. facilities of their Manufacturing, Warehouse, Analytical and Research & Development Departments. Watson has a second 66,000 sq. ft. manufacturing and distribution center in Taylorville, Illinois.

Expertise in fluid bed technology has allowed the company to become a leader in supplying micro-encapsulated ingredients around the world. They can coat materials to mask flavor, enhance stability or provide moisture barrier protection and have a long list of micro-encapsulated nutritional products. They can also custom microencapsulate products.

By Robin Wyers

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