North Castle Trims Portfolio –

In the second realization for the Greenwich, Conn.-based North Castle Partners, the firm unloaded portfolio company Experimental & Applied Sciences [EAS] in a $320 million sale to Abbott Laboratories. The transaction is expected to close in the fourth quarter.

EAS manufactures and distributes nutritional food and supplements, and markets its products under the EAS HP, Myoplex, AdvantEdge and other brands. The company’s sales are expected to be around $300 million in 2004, according to a research note published by Morgan Stanley, and EAS has more than 260 employees.

North Castle, which earlier this year performed a recapitalization on Leiner Health Products, will realize a return of more than 2.5x its original equity investment. The firm, using its North Castle Partners Fund II, took over EAS in the summer of 1999, and as early as March of this year was rumored to be seeking a sale of the company. North Castle hired UBS to run the auction.

While the supplements market has received some notoriety in recent years, with the BALCO mess surrounding baseball and earlier questions about andro’ and ephedra, EAS has seemingly taken on an initiative to quash these issues and make their products more mainstream-friendly. Most recently the company announced a label certification agreement with the NFL and earlier this year, the company unveiled a new line of low-carb high-protein drinks, bars and shakes.

Brent Knudsen, a managing director with North Castle, confirmed this strategy in a press release, noting that the firm worked with management to “transfer product technology that was developed for high-end specialty users into products and brands that were introduced into mass consumer channels and markets.”

When EAS was first rumored to be on the block, early reports had fingered Hershey as a potential buyer for the business, but Abbott has clearly demonstrated a desire to bolster its presence in the healthy living nutritional market. In 2003, Abbott paid roughly $160 million to buy ZonePerfect Nutrition, and the acquisition of EAS will expand the company’s product line within that market and will also allow for some synergies between the two product lines.

The sale was valued at roughly 1 to 1.1x EAS’ estimated 2004 sales, according to Morgan Stanley, which described the valuation as reasonable’ for the business.

Snapshot

Target: EAS

Seller: North Castle Partners

Buyer: Abbott Laboratories

Purchase Price: $320M

Advisor: NCP: UBS