LEXINGTON
The good vibe about a potential expansion of Vitacost.com Inc. was tempered yesterday by news that the company may be putting itself up for sale.
Vitacost, which is based in Boca Raton, Fla., but has a large operation in Lexington, said in a statement Thursday that "it is currently identifying and evaluating its strategic and financial alternatives to enhance stockholder value."
That includes "the identification of potential business-combination partners and purchaser candidates."
The company has hired Oppenheimer & Co., an investment financial company, to help explore its options.
The statement was released just 3½ hours after Vitacost announced plans to double its local operation to 227,000 square feet, as well as double its work force to nearly 600 jobs.
Vitacost is a manufacturer, distributor and online retailer of vitamins, herbal and other health-supplements.
The company is eligible for up to $450,000 in city and county incentives and a matching $450,000 grant from the One North Carolina Fun in regard to the expansion. The company said yesterday it also is eligible for up to $2.5 million in incentives from the state based on "program eligibility."
Frederick Moran, the managing director of The Benchmark Co. LLC of Boca Raton, said in a report yesterday that the statement is directly related to Vitacost's battle with its largest shareholder group, Great Hill Partners, over control of the board of directors.
Great Hill, an investment firm based in Boston, owns 19.7 percent of Vitacost. It wants to replace four of the seven Vitacost board members with its nominees, potentially as early as mid-July.
"Rather than support building shareholder value by developing the operations, the board has opted to consider quickly selling to cash out before they potentially lose their board positions," Moran said.
"Perhaps the board is attempting to push Great Hill into buying the entire company before board control shifts to Great Hill," Moran said.
Ira Kerker, the chief executive of Vitacost and a board member, could not be reached for comment yesterday.
Max Walser, the chairman of the Davidson County Board of Commissioners, said yesterday that he was unaware that Vitacost was having shareholder problems or considering a sale. He deferred comment to Steve Googe, the director of the Davidson County Economic Development Commission.
Googe said that Kerker told him of the shareholder dispute weeks ago. He said he "feels comfortable with Vitacost's management and the company."
The incentive packages are transferable to another company if Vitacost was sold, he said.
"We would take a long look at new ownership," he said "It would have to pledge to maintain the jobs and investment commitment."
Katharine Neal, a spokeswoman for the N.C. Department of Commerce, said that it has dealt with ownership changes regarding incentive packages.
Even though Vitacost had a $5.9 million profit in 2009, Great Hill said in a May 11 regulatory filing that it "believes that the board has overseen significant erosion in stockholder value since the company's initial public offering" in September 2009.
Great Hill cited "a manufacturing logistics issue" at the Lexington plant during the first quarter as an example of poor board oversight. Vitacost said on May 6 that it had temporary back-order issues during the first quarter that contributed to $1.2 million in canceled orders.
"Regardless of whether Vitacost gets sold or cedes control to Great Hill Partners, it could help the stock short-term," Moran said.
Since hitting a 52-week high of $13.45 a share on March 23, the share price has fallen 31 percent. The price did get a boost yesterday, closing at $9.23, up 92 cents.
"We do not believe selling Vitacost for less than a midteens price per share is in the best interest of major, long-term shareholders," Moran said.
rcraver@wsjournal.com | 727-7376
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