Hain to explore sale of protein business, paving way for potential acquisition of company

  • Hain Celestial said it is exploring a sale of its protein business.
  • The sale could pave the way for an acquisition of the whole company, sources tell CNBC.
  • Potential acquirers in the past have balked over the company's mishmash of businesses, which made it difficult for one buyer to acquire it.
Irwin Simon, CEO, Hain Celestial
Scott Mlyn | CNBC
Irwin Simon, CEO, Hain Celestial

Hain Celestial announced Wednesday it is exploring a sale of its protein business, which sources say could pave the path for an acquisition of the company.

The owner of Alba Botanica skin and hair care products and Terra Chips has long been an acquisition target, and a willing seller at the right price, sources have told CNBC. Many of the country's largest food companies looked and passed, though, because there is no one clear buyer for all of its brands. Getting rid of the protein business could help solve that issue, sources tell CNBC.

Hain is also under pressure from activist investor Engaged Capital, which disclosed a 9.9 percent stake in the company over the summer. A settlement with the firm recently put Engaged's founder, Glenn Welling, on the Hain board.

The protein business on the block includes Empire Kosher Poultry and Plainville Farms. This past fiscal year, the business generated $509 million in sales, or 18 percent of Hain's revenue.

"While we continue to believe this is a highly attractive business with very good growth potential ... we have determined it is not core to our go-forward strategy," CEO Irwin Simon told analysts.

"I think it being part of a larger strategic protein company makes a lot more sense."

Logical buyers for the protein business include Tyson Foods, Cargill or Smithfield Foods.

Once Hain sells the unit, likely buyers for the rest of the company include Nestle and Unilever, sources say.

The sources declined to be named because the information is confidential.

For the fiscal 2018 second quarter, Hain said its net sales rose 5 percent to $775.2 million, from the same quarter last year. It reported adjusted net income of $42.7 million, a 30 percent increase over the prior year.

Shares of Hain, which has a market capitalization of $3.7 billion, were trading down about 3 percent in early afternoon trading.

Hain's Simon has a contract that says he will receive compensation upon change of control of the company that, among other rewards, includes three years' annual salary and three years' average annual bonus. His base salary for 2017 was $1,905,000.