GNC set for China boom as Harbin pumps in $300m to become largest single shareholder

By Gary Scattergood contact

- Last updated on GMT

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

Related tags: Chief executive officer

Supplement firm GNC looks set for considerable expansion in China, with Harbin Pharmaceutical Group Holding Co (Hayao) investing $300m to become the firm's largest single shareholder.

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

While GNC has enjoyed some success via e-commerce channels in China, it has been looking to gain a stronger foothold in the domestic market.

Its Q3 results, published in October, revealed that revenues for its international business increased by 19.3%, largely driven by China.

At the time, however, it added: "We continue to evaluate options to further penetrate the market in China where we see significant opportunity for long-term growth.

"At this time, we cannot share details on how we intend to accelerate this growth but will do so when appropriate."

That appears to have changed very quickly, with Hayao now set to provide GNC with access to its established relationships in the market. This includes its ability to accelerate product introduction by using its existing 'Blue Hat' registrations required for sales in China.

Harbin will also provide GNC with access to its major pharmaceutical distribution network, as well as expertise in operational and manufacturing.

Multiple benefits

Ken Martindale, GNC chief executive officer, 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 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."

"As a recognised leader in China, Hayao​ is an ideal partner as we look to leverage the strength of the GNC brand and capitalise on the demand for nutritional supplements in China.

"Its strong distribution network and regulatory, operational and manufacturing expertise will enhance our ability to expand our local product assortment.

"We are confident this partnership will provide us with the expertise to navigate the competitive Chinese landscape and rapidly expand our brand in China."

The transaction is expected to close in the second half of 2018, subject to regulatory approvals in the United States and China, as well as GNC shareholder approval. It will also hinge on successful completion of the extension of the company's term loan facility due March 2019, entry into definitive agreements regarding the joint venture, and other customary closing conditions. 

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.

Zhang Zhenping, Chairman of Harbin, said: "GNC is one of the most recognised health and wellness brands globally. We are excited about the opportunity to partner with Ken and his leadership team to drive long-term value creation in all markets in which Hayao and GNC operate.

"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."

GNC is likley to push for further expansion in Asian markets in the coming months, with revenues in its domestic US market continuing to struggle.

For the third quarter, the firm's total revenues were down 2.9% to $609.5m, compared to the same quarter last year, although same-store sales rose by 1.3%.

Related news

Show more

Follow us

Featured Events

View more

Products

View more

Webinars