Los Angeles-based buyout firm Redux Holdings Inc. recently took a majority stake in Brea’s Naturade Inc. and promptly put the maker of health drinks and supplements into Chapter 11 bankruptcy.
Naturade said the bankruptcy reorganization gives it cover to overcome some bad acquisitions.
Naturade said it could emerge from bankruptcy in three to four months or earlier. Naturade, which employs 29 people, plans to draw on a $4 million credit line during the bankruptcy.
Last year, Naturade did about $14 million in revenue. It has racked up more than $18 million in debt, according to a filing in U.S. Bankruptcy Court in Santa Ana.
In the first six months of this year, Naturade did $6.6 million in sales and lost $3.3 million. The company had just $1,554 in cash at the end of March.
The culprit: some under financed and overly aggressive acquisitions in 2005, Naturade said in a bankruptcy court filing.
Last year, Naturade bought two health products companies, Miami-based Ageless Foundation Inc. and Sedona-based Symbiotics Inc. in a bid to ramp up sales that never fully materilialized.
The company now sells more than 200 products,”a number of these products are unprofitable,” according to court documents.
Naturade said there just isn’t enough cash around to keep the company on track.
“The debtor’s overhead burden is too high given its sales revenues and lack of earnings,” the company said in a filing.
Redux acquired the controlling stake in Naturade from Quincy Investment Corp., which is led by Peter Pocklington of Indian Wells.
Pocklington made his fortune in meat packing in his native Canada. He went on to own auto dealers, supermarkets and other businesses in Canada.
Traded Gretz
He’s best known as the former owner of the Edmonton Oilers hockey team who traded Wayne Gretzky to the Los Angeles Kings.
His Quincy Investment took control of Naturade in the summer of 2005 when the company made its acquisitions.
As part of Redux’s takeover, Pocklington could receive more than $1.5 million in Redux stock after the bankruptcy is completed.
Redux also said it may put up to $500,000 into Naturade to keep it operating during the bankruptcy.
The investor plans to get Naturade back on its feet with a focus “on reducing overhead, eliminating unprofitable products and the associated costs, and obtaining the necessary cash resources necessary to more aggressively market those products that are profitable.”
Redux couldn’t be reached for comment.
Both companies are lightly traded with Redux on Pink Sheets and Naturade shares traded on the over-the-counter bulletin board.
At recent check, Redux has a market value of $14 million. Naturade has been trading at around a nickel the past few weeks, down about 75% from a year ago. It has a market value of about $2 million.
Redux buys assets of companies and then “isolates, recombines and manages those assets to increase their value and to develop profitable strategic options,” according to its Web site.
Other Redux investments include Los Angeles-based Uprizer Inc., which helps companies distribute content over the Internet, and Studio City, an Internet search company.
The chief executive of Naturade, Bill Stewart, stepped down at the time of the Redux acquisition. Stewart remained president and Richard Munro became chief executive.
“I am confident that their combined leadership and experience will ensure positive forward progress within the Naturade organization for many years to come,” said Adam Michelin, chief executive and chairman of Redux, in a statement.
Redux said Munro had more than 20 years experience in executive leadership, operations and turnarounds.
Founded in 1926, Naturade products are sold in health food stores and natural foods supermarkets as well as traditional supermarkets, club stores and drug stores.
It sells drinks, drink powders and supplements.
The company’s claim to fame is its pioneering soy protein powders back in the 1950s, a product it continued to sell in the following decades.
In 2002,as the low-carb diet craze took off,the company broadened its focus to target the weight loss market with the Naturade Total Soy line of meal replacements for cholesterol reduction and weight management.
In 2003, Naturade added a product that claimed to reduce the absorption of starch calories.
In 2004, the company sold off its aloe vera products line to help finance its core soy powder line. It also introduced sport nutritional products and dietary supplements, among others.
Then came the buys of Ageless, which sells an anti-aging product, and Symbiotics, which sell products aimed at boosting the immune system.
As part of the buys and a new financing deal, Naturade issued nearly 31 million shares of common stock, warrants to buy 7 million shares at 80 cents apiece and another 7 million at $1. Naturade also landed $4 million in credit.
In a 2005 press release, Pocklington said he wanted to ramp up sales with more acquisitions, which never were announced.
