Bear Stearns Merchant Banking Buys Vitamin Shoppe

Bear Stearns Merchant Banking, the private equity arm of Bear, Stearns & Co. Inc., said yesterday that it acquired most of Vitamin Shoppe Industries Inc., a privately held retailer and direct marketer of vitamins, minerals, supplements and other nutritional products.

Buyout firms J.P. Morgan Partners, part of J.P. Morgan Chase & Co., and FdG Associates, a middle-market private equity firm, each had held half of a 70 percent stake in the chain, which they purchased in 1997.

Vitamin Shoppe, North Bergen, NJ, was started in 1977 as a corner store in New York by current CEO Jeff Horowitz. It has grown rapidly in the past five years and now operates 120 retail stores in 14 states and Washington, DC, along with a nationally distributed catalog and an Internet operation.

Vitamin Shoppe generated revenue of $263 million for the 12 months ended Sept. 30, according to Moody's Investors Service. About 65 percent of Vitamin Shoppe's revenue comes from its retail stores.

Terms were not disclosed, but insiders said Bear Stearns, paid slightly more than $300 million.

Bear Stearns, New York, invests in the company as vitamin sales are rising. Despite many rivals such as Dutch nutrition firm Royal Numico NV's General Nutrition Cos., which has 5,300 stores and franchises worldwide, Vitamin Shoppe has maintained a customer base through a frequent-buyer rewards program.

The acquisition of Vitamin Shoppe also expands Bear Stearns Merchant Banking's push into retail businesses and represents the third purchase of a retail chain by the group. It comes a week after Limited Brands agreed to sell Lerner New York/New York & Co., a 522-store clothing chain, to an investor group led by Bear Stearns' private equity unit and Richard Crystal, the retailer's chief executive, for $78 million.

Vitamin Shoppe management, including Horowitz and Tom Tolworthy, president and chief operating officer, participated in the acquisition and will continue to lead the company. They retain an equity interest in the company.

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