Summary of investments and acquisitions in the nutrition, natural and organic food, health & wellness, and green product industries.

• NCN News for February 23, 2011

Nestlé Acquires Specialty Pharma Company
Nestlé S.A. (Vevey, Switzerland) has acquired CM&D Pharma Ltd. (London), a pharmaceutical start-up which is testing a chewing gum for kidney disease sufferers. CM&D was established in 2007 as a pan-European specialty pharma company focused on foods for special medical purposes. The chewing gum contains a phosphorous binding agent called Fostrap, which benefits patients who have abnormally high blood levels of phosphorus as a result of kidney malfunction by removing it from their saliva. Other CM&D products in development include a nasal decongestant with a patented anti-infective based on silver; an oral insulin delivery system; and products for intestinal pain and to slow the progression of polyps to colon cancer. The acquisition comes a month after Nestlé’s health science subsidiary became operational with the goal of developing science-based nutritional solutions for medical conditions. CM&D was a portfolio company of Inventages Group in which Nestlé invests. Both Nestlé and Inventages are Nutrition Capital Network Cornerstone Investors.

MidOcean Invests in Freshpet
MidOcean Partners has acquired a significant equity position in Freshpet (Secaucus, N.J.), a manufacturer and marketer of fresh, refrigerated food for dogs and cats. Founded in 2006, Freshpet produces natural food and treats under the Freshpet Select, Deli Fresh, and Vital brands, which are sold in more than 5,000 locations across North America, including mass market, supermarket and pet specialty stores. Freshpet's strategic partner, Tyson Foods, Inc., continues as an investor and distribution partner. Richard Thompson, a MidOcean management affiliate, will become CEO of Freshpet and invest alongside MidOcean in the transaction. Thompson was formerly CEO of The Meow Mix Company, which was sold to Del Monte Foods in 2006. Freshpet presented its business plan at the NCN VI Investor Meeting in New York last year. Pet food sales were $17.78 billion in the United States in 2009, according to Euromonitor International.

Direct Selling Companies Evolv and XOWii Merge
Evolv Health (Dallas), a marketer of enhanced bottled water, has announced a merger with XOWii (Costa Mesa, Calif.), a direct seller of nutritional products including a weight loss line, supplements, and an energy drink with glucosamine for joint health and resveratrol for heart health. Evolv features a proprietary formula called Archaea Active made with extracts of alfalfa stems and leaves, milk whey protein, and enzymes designed to support a healthy inflammatory response and improve energy and endurance. Both companies were founded in fall 2009 and complement one another in terms of product lines, momentum within the direct sales industry, and business model, Evolv stated.

Henry’s Merges With Sprouts and Returns to the Boney Family
Smart & Final Stores LLC (Los Angeles) has agreed to sell Henry's Farmers Market (San Diego, Calif.) for an undisclosed amount to Sprouts Farmers Market (Phoenix, Ariz.), reuniting two natural retail chains founded by the Boney Family. The combined 98-store chain will be managed by the Boneys and operate under the Sprouts banner. Private equity firm Apollo Management LP will be the majority owner and remain the principal equity owner of Smart & Final. Boney’s stores were renamed Henry's Marketplace in 1997. In 1999 Henry’s was sold to Wild Oats Markets, the major competitor to Whole Foods Market. When Wild Oats eventually merged with Whole Foods in 2007, its Henry's and Sun Harvest Market stores were sold to a subsidiary of Smart & Final for $166 million. Earlier in 2007, Smart & Final had been acquired by the private equity firm Apollo Management for approximately $812.9 million. Meanwhile, Boney family members opened Sprouts Farmers Market in 2002 in Arizona, growing the chain to 55 stores. The merged chain will have 98 stores, more than 7,000 employees and annual revenues in excess of $1 billion. Whole Foods reported sales of $9 billion for fiscal year 2010.

Hain Celestial Makes Two European Food Acquisitions
The Hain Celestial Group, Inc. has announced two acquisitions in Europe: Danival SAS, a manufacturer of certified organic food products with facilities in France, and GG UniqueFiber AS, a manufacturer of natural, high-fiber crackers in Norway. Danival is a subsidiary of the Viva Sante Group, a European healthcare company specializing in OTC first-aid and wound care products. During calendar year 2010, Danival generated approximately $20 million in sales. GG UniqueFiber had sales of approximately $2 million. Terms were not disclosed.

Saputo Acquires Fairmount Cheese for $270 Million
Publicly traded Saputo Inc. (Montreal) has agreed to acquire Fairmount Cheese Holdings Inc. (Deerfield, Ill.), the parent company of DCI Cheese Company Inc., for $270.5 million in cash. Fairmount is a portfolio company of the private equity firm GTCR, which founded Fairmount in 2003 to consolidate companies in the fragmented specialty cheese industry. Starting with DCI in 2005, Fairmount completed four more principal acquisitions in the space. DCI is a large specialty cheese marketer with a portfolio of more than 100 types of domestic and imported specialty cheeses. It also makes spreads, salsa, hummus and dips. DCI had 2010 sales of about $460 million and EBITDA of approximately $34 million. Saputo describes itself as the 12th largest dairy processor in the world and the largest in Canada.

NSF International Acquires Pharma and Biotech Services Firm
NSF International (Ann Arbor, Mich.), an independent public health organization offering dietary supplement training, good manufacturing practices (GMP) registration, testing and certification services, has acquired Pharmalytica Services, a pharmaceutical contract laboratory based in Connecticut. Pharmalytica provides analytical services to the pharmaceutical and biotechnology industries. "Combining Pharmalytica’s knowledge in pharmaceutical analytical testing and R&D with our existing portfolio of dietary supplement and pharma solutions will help pharmaceutical companies worldwide make informed decisions when developing new products and strategies," said NSF International CEO and President Kevan P. Lawlor. NSF developed the only American National Standard for Dietary Supplements to verify label claims and purity.

Windsor Enters Asian Frozen Food Category
Family owned Windsor Foods (Houston), a frozen foods producer with a strong position in the Italian and Mexican categories, has acquired Discovery Foods (Hayward, Calif.) from the private equity firm Friedman Fleischer & Lowe. Terms were not disclosed. Discovery Foods makes frozen Asian snacks, appetizers and entrées, including Ling Ling Asian appetizers, Tai Pei Asian entrées and appetizers and VIP frozen fruit and vegetables. “We are excited about this strategic transaction, which expands our presence in the Asian frozen food market,” said Greg Geib, CEO of Windsor Foods. “Asian frozen food is a premier growth segment in the ethnic frozen food market.” According to a Packaged Facts report on frozen convenience foods in the U.S., pizza, hand-held breakfast and prepared vegetables led sales in the frozen convenience foods market, which was expected to grow by 2% by the end of 2010 for total sales of $16.8 billion. Ethnic frozen foods have also expanded their base by tapping into new cuisines.

Better Burger Chain Attracts Investment
Burger Lounge (San Diego, Calif.), known for burgers made with organic, grass-fed beef and organic wheat buns, has received an undisclosed investment from private equity firm KarpReilly LLC (Greenwich, Conn.). Burger Lounge has five locations in San Diego and plans to open in Los Angeles later this year. Three new locations are planned for 2011. The fast casual chain has an average check of $12 per person and average unit sales of about $1.5 million, according to an article in Nation’s Restaurant News. KarpReilly has also invested in the Habit Burger Grill (Irvine, Calif.), which has 43 locations, in addition to other restaurant businesses.

Accel Partners Invests in Abe’s Market Online
Abe’s Market, an online marketplace for natural products, has closed a $3.4 million Series A round of financing led by Accel Partners and joined by existing investor Index Ventures and other angel investors. Funds will be used for “aggressive and innovative marketing.” Launched in October 2009, Abe’s Market offers an online presence for natural and organic companies looking to expand beyond regional markets. It works with nearly 300 vendors and has seen orders grow by 900% over the past six months, according to the company. “We have seen tremendous growth in specialty e-commerce. With its fragmented base of passionate sellers and a fast-growing population of motivated buyers, we see natural products as a particularly attractive category,” said Adam Valkin, a partner at Accel Partners, which counts Etsy, Groupon, Kayak, Diapers.com, ModCloth and Bonobos among its e-commerce investments.