Sunday, March 26, 2017

Carlyle's Bounty Looms in New York

Bloomberg reported:

Carlyle Group LP is weighing an initial public offering of vitamin and supplement firm Nature’s Bounty Co. alongside its ongoing sale process, people with knowledge of the matter said.

Nature’s Bounty is expected to have an enterprise value of about $6 billion in a sale or IPO, the people said.
Carlyle purchased the company for $3.8 billion.  Dealbook reported in February:

New borrowing helped fund dividends totaling almost $1.2 billion, allowing the buyout firm to recoup three-quarters of its investment in three years.
In addition Carlyle mined the company for nearly $90 million in management and consulting fees from 2013-2015.  Did Nature's Bounty employees get value from above?

Bloomberg offered the latest employment statistic of 11,000 workers.  That's 3,400 jobs lost, a 24% decline in employment for the company under Carlyle Group sponsorship.

The Orange County Register reported new job cuts for Nature's Bounty employees in California:

Some 223 people will lose their jobs at The Nature’s Bounty Co. facilities in Garden Grove and Santa Fe Springs as the company shifts operations elsewhere in the country, including New York, where it will get $35 million in state tax incentives.
Employees lamented changes since Carlyle purchased the company in 2010.

Carlyle Group has destroyed in 6+ years what two great men spent a lifetime building and that was once... a respectable company. It's not what you know anymore , it's how low you're willing to go with losing your self respect and continuing with the awful direction the company has been nose diving towards.
New York state ignored Nature's Bounty employment history in giving $35 million in economic development incentives:

To encourage The Nature’s Bounty Co. to expand on Long Island, Empire State Development offered the company a grant of up to $25 million, as well as up to $8.5 million in performance-based tax credits through the Excelsior Jobs Program and $1.5 million in tax credits through the Employee Training Incentive program. Over the next year, the company will create 157 new jobs and retain 2,042 jobs, while investing over $142 million to modernize and expand its Long Island operations and consolidate China and California operations into its Long Island facilities.
Texas gave Carlyle's Vought Aircraft Aviation $35 million in 2004 for 3,000 new jobs which never arrived.  That deal involved relocating production from Nashville, TN and Stuart, FL.  Texas taxpayers had $35 million of their hard earned money turn into a non-debt, non-equity capital injection for five years.  Carlyle refunded a mere $900,000 to the State of Texas before selling Vought.

Nature's Bounty may perform better than Vought but this deal bears watching.  Public funds are being used for:

major expansion and modernization of its corporate headquarters and manufacturing operations.
Corporate headquarters will get an upgrade and manufacturing will become automated.  That's how Carlyle can close production sites in California (223 jobs) and Zhongshan, China (105 employees) and add only 157 new jobs.  The drop from a combined 328 jobs to 157 is a 52% reduction. 

It's not clear what Carlyle plans to do with Nature's Bounty facilities. in China.

China. -- As of September 30, 2013, our subsidiary, Ultimate Biopharma (Zhongshan) Corporation ("Ultimate") owned in Zhongshan, China: a 50,000 square foot facility for manufacturing softgel capsules and for administrative offices, a recently built 75,000 square foot warehouse facility with packaging capabilities and 18.5 acres of vacant land adjacent to the manufacturing facility. In addition, Ultimate leased 11,300 square feet of dormitory space and 4,800 square feet of warehouse space in Zhongshan City. Also, one of our subsidiaries leased 84,800 square feet of warehouse space in Beijing. 
Note:  Nature's Bounty had no manufacturing facilities in China in its final 10-K filing before Carlyle's 2010 buyout.  
Overall Carlyle cut Nature's Bounty employment, set up manufacturing in China, and plans to shift it back to New York for $35 million in economic development funding.  How much political hay will Carlyle get from the Trump White House for re-importing jobs it once exported?

Carlyle wants a big return on Nature's Bounty and the people of New York get to help. 

Update 3-30-17:   New York state is generous in giving money to companies that have been fined for harming workers.