March 12, 2018 / 11:24 AM / 5 months ago

UPDATE 2-Clorox to buy Nutranext to expand its dietary supplements business

(Adds analysts' comments, background)

March 12 (Reuters) - Cleaning products maker Clorox Co said on Monday it will buy Nutranext, which makes multi vitamins and owns brands such as Rainbow Light and Natural Vitality, for $700 million, as it further expands its dietary supplements business.

The move comes amid a spate of deals in the vitamin and supplement sector. Pfizer and Germany’s Merck said last year that they were considering selling their consumer healthcare businesses.

People might be trying to capitalize on the excitement put forth by Pfizer and Merck to sell their businesses, said Liberum analyst Robert Waldschmidt.

"They’re not the same assets clearly but I think people view consolidation as going to be rampant in the coming years in this space, so some people are wanting to maximize their exit. And recognizing that they don’t want to be left out," Waldschmidt said.

Pfizer's healthcare business includes Centrum brand of vitamins, while Merck's includes nutritional supplements such as Seven Seas and Bion.

Oakland, California-based Clorox said it expects to fund the Nutranext transaction through cash and debt financing. The company, whose products range from its namesake bleach and cleaning products to Hidden Valley dressings and sauces, said it expects to close the deal in the quarter ending June 30.

The company expects the deal to cut earnings by 7 cents to 11 cents per share in that quarter and by 8 cents to 12 cents per share the next fiscal year, before adding to profit in fiscal 2020.

While we understand the strategic rationale behind the transaction, the price tag strikes us as steep, said Deutsche Bank analyst Steve Powers.

Sunrise, Florida-based Nutranext had sales of about $200 million in 2017, about 90 percent of which came from the United States.

Clorox's shares trading marginally lower at $130.75 in afternoon trading on Monday. (Reporting by Vibhuti Sharma in Bengaluru and Martinne Geller in London; Editing by Savio D'Souza, Bernard Orr)

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