China’s Shanghai Pharma targets Vitaco for takeover

Vitamins group Vitaco has been targeted for takeover by Shanghai Pharma in a deal worth almost $314m.

Vitaco chairman Greg Richards and CEO Ryan d’Almeida at the company's ASX listing.

Chinese interest in Australian vitamins and health food companies refuses to let up, with Shanghai Pharma today announcing a deal to buy ASX-listed Vitaco for over $300 million.

The Australian vitamins group (VIT) said its board unanimously recommended the all-cash $313.7m offer from Shanghai Pharma and its partner, Chinese private equity firm Primavera Capital, in the absence of a superior bid coming forward.

The agreement offers Vitaco shareholders a return of $2.25 a share, a 28 per cent premium to the group’s last traded price of $1.76.

The group admitted the uncertainty caused by changing regulations in China had played a role in the acceptance of the deal, with the agreement delivering a guaranteed return.

Uncertainty reigned in the vitamins market in April as new tax rules for cross border e-commerce were announced in the world’s second-largest economy.

“The scheme represents attractive upfront and certain value for shareholders, particularly given ongoing volatile macroeconomic conditions and regulatory uncertainty in China,” Vitaco chairman Greg Richards said.

The takeover target is best-known locally for its Nutra-Life vitamins and supplements brand and its Aussie Bodies sports nutrition brand. It also owns the popular Healtheries brand in New Zealand.

In spruiking the deal Primavera chairman Fred Hu said the Chinese market represented the primary growth avenue for Vitaco.

“We continue to be very bullish on the growth of middle-class consumption in China, and in particular the increasing demand for healthy, safe foods and nutritional products by Chinese consumers,” he said.

“We see tremendous potential for Vitaco’s collection of outstanding brands and high quality vitamins and supplements, sports nutrition and health food products in China.”

The buyers, who will need approval from the Foreign Investment Review Board, were advised by Macquarie Capital and King & Wood Mallesons on the deal.

Vitaco investors are likely to vote on the scheme in November, with its largest shareholder — Next Capital — declaring an intention to vote its 15.3 per cent stake in favour of the sale.