Partnership with Chinese company expected to boost GNC
GNC appears to be on the cusp of attaining a yearslong goal of making major inroads into the Chinese market with Tuesday’s announcement that it has entered a strategic partnership with a leading Chinese pharmaceutical firm to manufacture, market, sale and distribute GNC-brand products in that country.
As part of the agreement, Harbin Pharmaceutical Group Holding Co., also known as Hayao, will invest about $300 million in the Pittsburgh-based vitamin and supplement retailer, becoming its largest single shareholder. The GNC board will expand to 11 members, with five members from GNC and five from Hayao in addition to GNC CEO Ken Martindale.
The pact is expected to close in the second half of 2018.
Various websites describe Harbin as a major Chinese company involved in all facets of pharmaceuticals, from research and development to manufacturing and sales. The website PharmaCompass.com described it as one of the top 500 industry enterprises in China.
In a release, Hayao chairman Zhang Zhenping praised GNC as “one of the most recognized health and wellness brands globally.” He added, “In China, we are confident that we can leverage Hayao’s leadership to accelerate the company’s growth and expansion, and deliver GNC products and solutions to millions.”
Also Tuesday, GNC 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,” Mr. Martindale said in a release.
GNC shareholders got a taste of that enhanced value immediately, with shares hitting $5.71 Tuesday before settling at $4.93 at market close, up from a $4.19 close Monday.
As recently as early 2011, there was speculation that GNC Holdings would be sold to China’s Bright Food Group before GNC officials instead opted to go public in April 2011, launching the most successful IPO of the year.
From the initial $16.60 per share offering, GNC stock rose steadily, breaching the $60 mark in November 2013 before a tumultuous 2014 that saw shares lose nearly half their value by early August.
After recovering to a $50 share price a year later, the company’s stock has steadily declined, hitting a 52week low of $3.13 at one point.
During its quarterly earnings conference call Tuesday, the health and wellness retailer reported fourth-quarter net loss of $209.8 million on revenue of $557.7 million, compared with a $433.4 million loss on $569.9 million in revenue for the same period in 2016.