Vitamin Shoppe Considers Takeover Bid 'Likely Superior' To Current $208m Offer

Firm says following Liberty Tax' offers in early August, it received a second one that "is reasonably likely to lead to" a better deal.Vitamin Shoppe "intends to engage in negotiations with the" second bidder regarding but its board "expressly reaffirms its recommendation" to accept Liberty Tax' offer.

Five years of fading results and numerous failed attempts to stem the slump aren't keeping potential buyers away from [Vitamin Shoppe Inc.] as it reports having a second suitor.

The Secaucus, NJ-based nutrition, health and wellness manufacturer and retail chain on 9 September announced that following investment firm Liberty Tax Inc.'s $208m offer disclosed in early August, it received a second offer that "is reasonably likely to lead to" a better deal.

In its release, Vitamin Shoppe said it "intends to engage in negotiations with the" second bidder regarding its offer. However, the firm also said its board of directors "expressly reaffirms its recommendation" for being acquired by Liberty Tax.

The second bid, made by a party that Vitamin Shoppe isn't disclosing, came during the "go-shop" period that it and Liberty Tax agreed to following the acquisition offer. The period allowed Vitamin Shoppe, as a public company, to seek competing offers, with the original offer functioning as a floor for potential better offers. Go-shop agreements may allow the initial bidder an opportunity to match better offers for its acquisition target, though more often the initial bidder receives a break fee if the target is purchased by another firm.

Vitamin Shoppe says it "engaged in a broad solicitation of strategic and financial parties to determine whether they may have an interest in making" an acquisition. The bid from the as-yet undisclosed party was the only one it received during the go-shop period, which ended 5 September, it says.

The firm adds that it has not determined whether the second bid, which is subject to conditions including completing due diligence and "the negotiation of a definitive transaction agreement," is superior to Liberty Tax' offer. Not only could the second offer "ultimately result" in a better deal, but "discussions and negotiations with the [second suitor] could terminate at any time," according to the firm, which manufactures its own brands of nutrition, health and wellness products in addition to operating a retail network and offering online sales.

Second Share Price Jump In A Month

CEO Sharon Leite is in her second year at the helm with little success returning Vitamin Shoppe to growth, the same results her predecessor had for three years making "reinvention" of customers' experience in the firm's stores and with its products a focus that continues at the firm.

Its most recent change to boost sales growth was moving from a pilot to a chain-wide offering a revamped Healthy Awards loyalty program featuring three tiers that are all free to join and provide higher rewards the more a consumer spends. Program members, who account of 90% of its sales, also get access to in-store wellness coaches and to Healthy Awards Insiders Facebook group; consultations with certified nutritionists to develop personalized plans; bonus points promotions; choice of sale days; and a birthday gift. (Also see "Wellness Market News: Vitamin Shoppe Loyalty Program Relaunch, Used At-Home Test Strips On Market, More" - HBW Insight, 8 Apr, 2019.)

None of Vitamin Shoppe's moves under Leite, who took over as CEO in August 2018 as a veteran of the food, cosmetics and other consumer packaged goods sectors, or her predecessor has moved the needle on the firm's earnings scale substantially toward growth. Its annual sales ticked up from $293.4m in 2015 to $304.9m in 2016 but dropped to $268,8m in 2017 and were $248.5m in 2018. (Also see "Vitamin Shoppe's Buyer Took Tumultuous Path Toward Recent Turn To Investing" - HBW Insight, 8 Aug, 2019.)

News of Liberty Tax' offer, though, sent Vitamin Shoppe's shares soaring, closing up that day 42.51% at $6.47 at more than twice average volume trading. The share price varied slightly from then, closing at $6.43 on 6 September, until jumping with the firm's second-bid announcement and increasing steadily throughout the day in trading at roughly three times the average volume before closing at $7.15.

Liberty Tax' offer of $6.50 per share was a 43% premium on Vitamin Shoppe's closing price the day before and a premium of around 59% on the volume-weighted average price for the previous 30 days. The firms said they expect the deal to close during the 2019 fourth quarter subject to Vitamin Shoppe shareholder approval as well as clearance by regulatory agencies.

Vitamin Shoppe would be Liberty Tax's second acquisition target in the investment strategy it announced in July when it made its first acquisition, Buddy's Newco LLC, owner of the Buddy’s Home Furnishings chain. The firm, which owns the Liberty Tax Services tax-preparation service chain, also plans to change its name to Franchise Group Inc.