The bankruptcy of Quebec Weight Watchers, Ideal Protein, could cause the Caisse de dépôt et placement, Investissement Québec and the six other lenders of a banking syndicate including the Bank of Montreal, Nationale, Laurentienne, Desjardins, to lose a few kilos. the Bank of America and even an exotic lender, the Bank of China.
Ideal Protein, which sells a method and products for weight loss, is part of the same insolvent holding company as Laboratoires CO P and the Pharmalab factory in Lévis, which also closed in mid-August, leading to the on foot “for at least six months” of most of the 235 employees (around 200 in Quebec and 35 in the United States).
The company, which continues to transport its stocks, is restructuring and looking for a buyer, under the protection of the Creditors Arrangement Act.
Ideal Protein was handicapped, among other things, by its excessive debt, serious internal problems and profound changes which are disrupting its business model and the entire weight loss industry, explains trustee Martin Rosenthal of EY, appointed by the court at the request of the banking union.
Ideal Protein’s troubles began before appetite-suppressing drugs like Ozempic came on the market, Mr. Rosenthal said.
Despite improvements seen since new management took over a year ago, Ideal Protein was simply too loaded with debt, he says. “However, operations are continuing and the sales process is attracting a very high level of interest from potential buyers or investors who have signed confidentiality agreements,” adds Mr. Rosenthal, who says he expects that the company be bought and relaunched, including its manufacturing activities in Lévis, by the end of the year.
The company was acquired in 2015 by the investment fund APAX Partners of New York.
La Caisse and IQ exposed
The company owes about $200 million, including about $195 million to lenders, Mr. Rosenthal said. The list of creditors indicates only two lenders, the Bank of Montreal and Desjardins, which are the original members of a banking syndicate established in 2015 and which subsequently expanded, explains trustee Rosenthal. We find the six other lenders in the loan contracts he filed in court.
Mr. Rosenthal did not want to detail the claims of each of the eight lenders, but the Bank of Montreal and Desjardins have the largest sums at stake, he said.
The Caisse de dépôt lent US30 million in 2012, said a spokesperson who did not wish to indicate the balance. Investissement Québec lent US21 million in 2015 and the balance is US15 million, said a spokesperson.
According to a document filed in court, the Bank of China (Canada) lent US15 million in 2016. The documents filed in court do not quantify the debts of other banks.
Ideal Protein was co-founded in 2004 by entrepreneur Olivier Benloulou, from Gatineau. Mr. Benloulou, known in the automotive world for his collection of exotic cars that he shows on ZTélé, ceased to be CEO in January 2019. He was still on the board of directors when the company filed for bankruptcy in July. He did not respond to messages left by The Press.
Pharmalab was founded in 1953 by a pharmaceutical entrepreneur from Lévis, Marcel Vachon, who passed away in 2022. It manufactured Ideal Protein products. The companies were combined into the same holding company before the sale to APAX Partners.
Hit by COVID-19…
In 2015, under the leadership of Mr. Benloulou, Ideal Protein had set up a network of 3,000 independent clinics in the United States and Canada, where coaches supervised customers and sold its products, manufactured at the Pharmalab factory in Lévis. Ideal Protein also had a distribution subsidiary in France.
It’s unclear how much shareholders got from the sale to APAX Partners, but Ideal Protein was valued at US$436,500,000 in 2015, the insolvency filing says.
In 2016, sales reached US201 million and gross profit reached a record US81 million. The situation deteriorated after 2018 and COVID-19 undermined Ideal Protein’s business model, based on coaching in person. Ideal Protein stopped repaying its loans in 2020.
… threatened by Ozempic
Ideal Protein’s turnaround could be complicated in the United States – its main market – by increased competition from weight-loss drugs like Ozempic and Mounjaro. “These drugs are a huge threat to the sector [de la perte de poids] ; they are going to take away a big share of the market,” wrote American stock analyst Alex Fuhrman of the investment bank Craig-Hallum Capital Group in Minneapolis, Minnesota, in a note to his clients at the end of July.
Ideal Protein CEO Dawn Halkuff did not respond to an interview request from The Press, as did Dave Evans, partner at APAX Partners and lead investor in Ideal Protein.