Kainos Carves Nutrisystem from Tivity

Kainos Carves Nutrisystem from Tivity

Kainos Capital has agreed to acquire Nutrisystem, a direct-to-consumer nutrition and weight management brand, from publicly traded Tivity Health for $575 million.

Nutrisystem is an online provider of weight loss products and services. The company was founded in 1972 and originally sold its weight loss counseling and products in brick and mortar retail centers. Beginning in 1999, the company launched a direct-to-consumer selling strategy using both the Internet and 1-800 call centers.

Today, Nutrisystem provides its members with a weight management program that incorporates personal online counseling, including trained weight-loss coaches, registered dietitians and certified diabetes educators; and individual diet and exercise plans. Nutrisystem is headquartered near Philadelphia in Fort Washington, Pennsylvania.

Tivity Health acquired Nutrisystem in March 2019 for $1.3 billion. At that time, the company’s annual EBITDA was $88 million (a 14.8x valuation multiple). Tivity Health (NASDAQ: TVTY) is a Tennessee-based provider of health improvement, nutrition, and fitness services. The company was founded in 1981 as American Healthways and rebranded to Tivity Health in 2017.

Kainos Capital has invested in the health and wellness sector previously including the buy of SlimFast from Unilever in 2014 and its subsequent sale to Ireland-based nutrition company Glanbia in 2018 for $350 million, a 14.6x multiple of SlimFast’s 2017 adjusted EBITDA of $24 million.

“We look forward to working with the Nutrisystem management team to achieve the full potential of this incredible brand similar to what we accomplished with SlimFast,” said Bob Sperry, a partner of Kainos. “Nutrisystem offers its customers a complete, cost-effective weight loss program that is proven, great-tasting, and incredibly convenient, with no initiation or recurring membership fees. Customers don’t need to leave their homes to travel to a weight loss center for scheduled appointments, and they don’t need to weigh their food or count calories.  Everything customers need to accomplish and sustain their weight management goals is delivered right to their doors.”

MSD Partners is making a preferred and common equity co-investment in this transaction alongside Kainos Capital. MSD was formed in 2009 by the principals of MSD Capital, a family office formed to manage the capital of Michael Dell and his family. The firm is headquartered in New York City with additional offices in Santa Monica, California and West Palm Beach, Florida.

“We have tremendous respect for the franchise Kainos has built-in health and wellness brands and are thrilled to be partnering with them in the acquisition of Nutrisystem,” said John Civantos, the co-head of MSD’s private capital group. “This investment is a perfect example of both MSD’s application of deep domain expertise in technology-driven, direct-to-consumer businesses, and our unique ability to construct creative, flexible capital solutions at scale.”

Dallas-headquartered Kainos invests from $50 million to $150 million of equity in manufacturers and marketers of food products, as well as other consumer products in the household and personal care industries, and over-the-counter health and nutritional products sectors. In November 2016, Kainos held a hard cap close of Kainos Capital Partners II LP with equity commitments of $895 million.

“We are excited to reestablish Nutrisystem as an independent company that is well-positioned to help the significant portion of the US population that wants to be healthier, yet struggles with weight management,” said Andrew Rosen, managing partner of Kainos. “For the approximately 40% of adults who are considered overweight – and increasingly at risk for a range of serious conditions – Nutrisystem can play an important role in helping improve quality of life.”

Rabobank is providing debt financing for the transaction and is also acting as a financial advisor to Kainos.

The closing of this transaction is expected during the fourth quarter of 2020.

© 2020 Private Equity Professional | October 29, 2020

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