CITIC Capital-backed Harbin Pharma buys 40% stake in GNC
China’s Harbin Pharmaceutical Group, which is controlled by CITIC Capital, has agreed to acquire a 40% stake in GNC Holdings for $300 million, becoming the largest shareholder in the US-based nutritional supplements retailer.
GNC will sell 299,950 new convertible preferred shares to Harbin Pharmaceutical at $1,000 apiece, according to a filing. The capital will be used to repay debt and for other corporate purposes.
In addition, GNC and Harbin Pharmaceutical will form a joint venture - in which the Chinese company will own a 65% stake - to manufacture and distribute GNC-branded products in China. Harbin Pharmaceutical will provide GNC with access to its distribution network and operational expertise, as well as leveraging its local sales license.
Founded in 1935, GNC sells a wide range of health and wellness products globally, such as protein, weight management supplements, and vitamins. As of the end of 2017, it had approximately 9,000 retail stores – of which about 6,700 are in the US – in 50 countries.
“Hayao's [Harbin Pharmaceutical] investment in GNC is a testament to the strength of our brand and the tremendous global opportunity ahead, including in China,” GNC CEO Ken Martindale said in a statement. “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.”
Harbin Pharmaceutical is the second-largest pharmaceutical company in China, producing more than 20 dosage forms and over 1,000 drugs, such as antibiotics, modern Chinese medicines, and animal vaccines. The group has built a retail network of 300,000 pharmacies in 2,500 counties in China. Its listed subsidiary, Renmin Tongtai, operates 300 chain pharmacies nationwide, with dominating market share in Harbin, Heilongjiang province.
The company was CITIC's first state-owned enterprise restructuring deal. The GP partnered with Warburg Pincus and a local PE firm to acquire a 55% stake in the company in 2015. CITIC and Warburg Pincus each held 22.5%.
Last year, CITIC proposed to acquire Warburg Pincus’ entire interest in Harbin Pharmaceutical and then last month it increased its stake to 60.86%, becoming the controlling shareholder. Harbin State-owned Assets Supervision & Administration Commission of the State Council (SASAC) owns the remaining shares.
The GNC transaction is expected to close in the second half of this year.
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