Chinese firm buys big stake in GNC

Press enter to search
Close search
Open Menu

Chinese firm buys big stake in GNC

By Marianne Wilson - 02/14/2018
GNC, which has been working to turnaround its business, has entered into a strategic partnership and joint venture with a leading pharmaceutical company in China.

Harbin Pharmaceutical Group Holding Co. ("Hayao”) will invest approximately $300 million in GNC, becoming the single largest shareholder in the U.S. vitamins and supplements retailer. Hayao will own approximately 40% of the company’s stock.

In addition, GNC and Hayao have agreed to form a joint venture for the manufacturing, marketing, sale and distribution of GNC-branded products in China.

“Hayao's investment in GNC is a testament to the strength of our brand and the tremendous global opportunity ahead, including in China,” said Ken Martindale, who became CEO of GNC in September. “By partnering with Hayao and pursuing plans to amend and extend our term loan facility, we enhance our capital structure and financial flexibility and establish a strong platform for growth in the Chinese market.”

In connection with the investment, the GNC board will be expanded to 11 members including five members from GNC, five members from Hayao and Martindale.

GNC also said it planned to extend the maturity date of a loan due next year to March 2021.

The two announcements together “represent important and exciting steps in our efforts to optimize our capital structure and build on our recent momentum as we position GNC to drive growth, improve financial performance and enhance long-term shareholder value,” said Martindale.

China, the largest international market for supplements, has been a bright spot for GNC, which has struggled with declining U.S. sales in recent years. The company is working to turnaround its business with new marketing, a simplified pricing structure for customers and a revamped loyalty program.

GNC’s same-store sales increased 5.7% in domestic company-owned stores (including GNC.com) in its most recently completed quarter. Its net loss narrowed to $209.8 million, compared with a net loss of $433.4 million in the year-ago period.

“Our results in the fourth quarter reflect our work to reinvigorate the GNC model and are indicative of the momentum we gained throughout the year," said Martindale. "Customers are increasingly responding to our simplified pricing model, enhanced loyalty programs, and exclusive product lines, and we made meaningful strides in improving the customer experience across all our platforms."

Related Topics