CITIC-controlled Harbin Pharma to acquire 40% of US retailer GNC for $300m

CITIC Capital-controlled Harbin Pharmaceutical Group (Hayao) on Wednesday announced that it has entered into an agreement to acquire a 40 per cent stake in NYSE-listed GNC Holdings and also form a China joint venture with the latter.

As per the agreement, Hayao will invest approximately $300 million in GNC to become the single largest shareholder in the company. The investment is expected to be used by Pittsburgh-headquartered health, wellness and performance retailer GNC to repay outstanding debt and for general corporate purposes.

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, leveraging the synergies between Hayao and GNC in the fast-growing Chinese market, Hayao said in a statement.

Harbin Pharmaceutical, a listed company controlled by Hayao, will fulfil the obligations of the agreement on behalf of Hayao and operate the relevant business, it added.

CITIC Capital, the private equity arm of state-owned Citic Group Corp, had increased its stake in Harbin Pharmaceutical to 60.86 per cent last month, becoming the controlling shareholder of the Chinese business in which it has been an investor since 2005.

Ken Martindale, chief executive officer of GNC said, “Hayao’s investment in GNC is a testament to the strength of our brand and the tremendous global opportunity ahead, including in China. 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.”

“Hayao’s strong distribution network and regulatory, operational and manufacturing expertise will enhance our ability to expand our local product assortment,” he added.

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.

Goldman Sachs & Co. is acting as financial advisor, and Latham & Watkins LLP is acting as legal advisor to GNC. Morgan Stanley & Co. LLC is acting as financial advisor to Hayao.

The transaction is expected to close in the second half of 2018.

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