Supplements retailer GNC seeks China partner to aid turnaround -sources

Health and Happiness (H&H) International Holdings

07/09/2017 13:08

* GNC began strategic review last year 
    * GNC asks would-be China partners for proposals -sources 
    * Gloria Pharma expected to submit proposal -sources 
    * GNC not considering sale of whole company -sources 
 
    HONG KONG/SHANGHAI, Sept 7 (Reuters) - U.S. nutritional 
supplements retailer GNC Holdings is seeking a partner to boost 
sales in China as it battles weak revenues and a sliding share 
price, people with knowledge of the matter said. 
    Loss-making GNC  GNC.N  hopes a Chinese partner with 
distribution channels will lift its fortunes in the country, and 
has asked several companies to submit proposals this week, the 
sources told Reuters. 
    GNC, which hired Goldman Sachs  GS.N  last year to carry out 
a strategic review of its business which could result in a sale 
of the company, declined to comment on Thursday. 
    Chinese companies and private equity firms have expressed 
interest in a potential deal but several, including conglomerate 
Fosun International  0656.HK  and Jack Ma-backed Yunfeng 
Capital, pulled back as GNC's share price continued to drop, 
according to people familiar with the matter.  
    GNC's market value has shrunk by more than 70 percent to 
around $560 million since it announced the strategic review. 
    However, Harbin Gloria Pharmaceuticals  002437.SZ , is 
expected to submit a proposal this week, people familiar with 
the company said.  
    The drugmaker, based in Northeastern China's Heilongjiang 
Province, had contacted lenders and private equity firms to form 
a consortium to acquire GNC for about $1.1 billion excluding 
debt, but the plan was shelved when GNC shares started to pick 
up in June, according to two people with knowledge of the plan.  
    At the time, GNC approached China Merchants Bank  600036.SS  
to finance the deal, according to the two sources. 
    China Merchants Bank, Gloria Pharma and Yunfeng Capital did 
not respond to requests for comment. 
    Deutsche Bank, which is advising Gloria Pharma, and Fosun 
International both declined to comment. 
    Two other sources said GNC, which named Ken Martindale, a 
former Rite Aid Corp executive, as chief executive on Wednesday, 
would be open to ideas such as an investment in its China 
business, but it is not considering a sale of the whole company. 
    GNC has been struggling with competition from online rivals 
and a wider move towards organic foods rather than supplements. 
    China, however, has been a bright spot for GNC, which sells 
vitamins and herbal supplements and has become one of the top 
sellers on China's online shopping platforms. 
    China's health supplements and vitamins market is set to 
grow to 168 billion yuan ($24.5 billion) by 2021 from around $18 
billion last year, according to Euromonitor International, 
driven by increasingly health-conscious younger consumers and 
spurring investment by Chinese firms. 
    Gloria Pharma produces drugs for cardiovascular diseases, 
diabetes, cancer, infections, arthritis and vitamin supplements. 
  
 
 (Reporting by Kane Wu and Julie Zhu in HONG KONG and Engen Tham 
in SHANGHAI; Additional reporting by Carol Zhong of Thomson 
Reuters Basis Point; Editing by Clara Ferreira Marques and 
Alexander Smith) 
 ((kane.wu@thomsonreuters.com; +85228436590; Reuters Messaging: 
kane.wu.thomsonreuters.com@reuters.net)) 
 
Keywords: GNC HLDG M&A/CHINA