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(Bloomberg) -- Nestle SA is among companies exploring a purchase of Hain Celestial Group Inc., a U.S. maker of organic and vegetarian food, according to people familiar with the matter, as the Swiss giant seeks to expand into healthier fare.
The Vevey, Switzerland-based company has held preliminary talks about purchasing all or parts of Hain Celestial, said the people, who asked not to be identified because the details aren’t public. Other companies, including U.S. food makers and buyout firms, are also interested in Hain Celestial, the people said. No decisions have been made and Hain Celestial may decide against a sale, the people said.
Shares of Hain Celestial rose as much as 11 percent on Monday after they were temporarily halted in New York. The shares closed up 2.6 percent to $40.89, valuing the company at more than $4.2 billion.
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Representatives for Hain Celestial, which owns brands including Health Valley cereal, Terra chips and Alba Botanica skin care, didn’t immediately respond to requests for comment. Nestle, which was down 0.3 percent early Tuesday in Zurich, declined to comment.
Nestle would benefit from Hain’s U.S. distribution network, but an acquisition would be expensive at current valuations, MainFirst analyst Alain Oberhuber said in a note.
“While an outcome to a deal is currently uncertain, overall we do not find Hain Celestial attractive at current multiples, and there would need to be significant sales and cost synergies to justify such a deal,” he said.
Like many food companies, Hain Celestial and Nestle have been whipsawed by changing consumer tastes. The U.S. company’s profit has shrunk from a peak of $180 million in 2015. It had adjusted net income of $102.5 million on revenue of $2.9 billion for the year ended June 30, according to data compiled by Bloomberg.
The company, which supplies natural and organic food to Amazon.com Inc.’s Whole Foods Market and other grocers, reported financial results in June for the first time in more than a year after completing an internal accounting probe. The company said in August 2016 that it was delaying the release of its financial results and examining its accounting practices. The company said later it didn’t need to restate any of its results.
Activist investor Engaged Capital, founded by Glenn Welling, disclosed a 9.9 percent stake in Hain Celestial in June and began pressing for changes, including a possible sale. Engaged Capital believes the company could fetch $46 to $73 a share in a sale based on recent acquisitions in the food industry, a person familiar with the matter said in June.
Hain Celestial said in September that it was working with advisers to explore strategic alternatives. The company, based in Lake Success, New York, also agreed to add six new board members nominated by Engaged Capital.
Nestle’s sales fell to $91 billion in 2016 from a peak of more than $100 billion in 2014, according to data compiled by Bloomberg.
The company, which is cutting jobs at its skin-health unit and shifting headquarters in the U.S. and France, may spend close to 1 billion Swiss francs ($1 billion) on a business reorganization this year, Chief Financial Officer Francois-Xavier Roger said on a call with reporters in October.
Nestle Chief Executive Officer Mark Schneider, who took the helm at the owner of Nespresso coffee and Perrier bottled water this year, is also under pressure from an activist investor. Since Dan Loeb disclosed a stake in the company in June, Schneider has stepped up efforts to bulk up in niche markets like organic food and hipster coffee as Nestle foresees the slowest sales growth in at least two decades this year.
The acquisitions are part of a trend by big food and beverage companies to buy up smaller players to capture their rapid growth in premium segments. Nestle faces pressure as its leading position in the market for global packaged coffee has been challenged by JAB Holding Co. JAB has spent more than $30 billion expanding its empire with brewers such as Keurig Green Mountain and Peet’s.
In recent months, Nestle has snapped up vegetarian burrito maker Sweet Earth Inc. and drip-coffee specialist Blue Bottle Coffee Inc. and invested in Freshly, a U.S. meal preparation company. Nestle is also seeking a buyer for its U.S. confectionery business as consumers cut back on sugary snacks.
(Updates with analyst comment in fifth, sixth paragraphs.)
--With assistance from Craig Giammona Eric Pfanner Aaron Kirchfeld Scott Deveau and Corinne Gretler
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