GNC See-Saw Leans Toward IPO

February 1, 2011

According to a January 21 article from Reuters, supplement retailer GNC is leaning towards IPO after Chinese food conglomerate BrightFood cooled to the prospect of a $2.5 billion acquisition. Reuters reported that a “source familiar with the negotiations” suggested that Bright Food has “walked away” from acquisition talks over an inability to settle on a price. Talks may be resumed, but the article avers that an IPO is most likely in the cards going forward.

GNC, which is currently owned by private equity firm AresManagement and the board of the Ontario Teachers’ Pension Plan, already has two IPO attempts under its belt. Its previous owner, ApolloManagement, made two unsuccessful public offerings before selling GNC in 2007. GNC filed registration papers with the SEC in September 2010 for a potential IPO of $350 million.

The company continues to stay profitable, with its retail revenues up 7.2% and margins up 1.2% in the first nine months of 2010 compared to 2009, though its contract manufacturing and wholesale sales fell 5.2% during the period. GNC retains a strong international retail presence, with 7,100 stores in 48 countries.

NBJ Bottom Line

It’s all speculation now, though. Scott Van Winkle, managing director of CannacordGenuity, warns against putting much confidence in a “source close to the situation” when it comes to an IPO. “No one at GNC or its bankers or attorneys is going to be discussing anything during an IPO quiet period,” Van Winkle told Nutrition Business Journal.

Were the Bright Food deal to come to fruition, GNC could expect increased penetration into Chinese retail, a move that could open up new opportunities for wholesalers looking to expand internationally. But GNC’s owners appear to be most conscientious of price. “If Bright Foods offers a valuation superior to what GNC believes it can garner in the public equity markets, I would expect a sale,” Van Winkle said. “If not, then an IPO.”

Related NBJlinks:

2010 Deals of the Year

GNC Partners with Chinese Food Conglomerate, Looks to Capitalize on China’s Booming Supplement Market

Financial Roundup: Vitacost, GNC and Kiss My Face

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