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Numico to Sell GNC to Fully Focus on Core Businesses

Royal Numico N.V. announces that it has reached agreement on the sale of GNC (US) to Apollo Management, L.P. (US) for USD 750 million. The transaction is subject to customary regulatory approvals and is expected to be completed in the fourth quarter of 2003.

- Numico to sell GNC for USD 750 million, transaction subject to shareholder approval.
- Numico fully focussed on core high-growth, high-margin Baby Food and Clinical Nutrition.
- Significant reduction in financial risk: lower net debt, related interest expenses and USD exposure.
- Significant reduction in operational risk: retail exposure eliminated, focussed on core competencies.
- Impairment on GNC book value, net of deferred tax asset, of approximately EUR 375 million.
- Negative impact of transaction on shareholders’ equity of approximately EUR 450 million; shareholders’ equity position will be restored within 2-3 years through profits.

Jan Bennink, CEO of Numico commented on the intended sale of GNC:
“With the intended sale of GNC, Numico will sharpen its focus on its core businesses, Baby Food and Clinical Nutrition, to achieve the objective of becoming a high-growth, high-margin specialised Nutrition Company.

The decision to divest GNC is based on an assessment of our business strategy, where we see limited synergies with our current core businesses. The divestment has many advantages for Numico: it will significantly reduce the risk level, both financially and operationally, provides us with more financial flexibility and allows management to focus completely on maximising profitable growth in both Baby Food and Clinical Nutrition.

We have received a compelling offer. And, importantly, this action gives us the certainty to achieve our aggressive goals of sales growth and EBITA margin. This factor made us decide to sell GNC now rather than at a later stage.

We are convinced that selling GNC now, and thereby returning Numico to its core competencies, will maximise shareholder value as we will create a high-growth, high-margin specialised Nutrition Company based on two very strong and vibrant businesses.”
Peter Copses, a senior partner at Apollo Management, L.P., commented:
“We are delighted to be able to acquire GNC, the world’s premier specialty retailer of vitamins, sports nutrition and diet products. GNC is a powerful brand and we look forward to working with its management team, dedicated employees and loyal franchisees in building the Company in the future.”

The decision to sell GNC is the result of a comprehensive process during which all strategic options for GNC have been thoroughly assessed. Based on this, Numico is convinced that even a further improvement of GNC’s performance does not outweigh the lack of strategic fit. Final approval will be asked for from shareholders during an extraordinary General Meeting of Shareholders to be held on 3 November 2003.

The proceeds of the transaction will be used to pay down the dollar-denominated part of the existing senior bank loan facility. Consequently, Numico’s debt level and related interest expenses will be substantially reduced.

The divestment of GNC also results in a significant reduction in operational risk through the elimination of a source of earnings volatility and retail exposure. Post this divestiture, Numico will be solely focussed on its two remaining high-growth, high-margin businesses Baby Food and Clinical Nutrition.

Following the sale of GNC, Numico will liquidate Numico USA Inc. thereby creating a fiscal loss of approximately EUR 1,150 million. This fiscal loss will result in a tax credit (deferred tax asset) of approximately EUR 400 million in the Netherlands that will be utilised over a period of 10 to 12 years through future taxable profits in the Netherlands. As a result, the net impact of the impairment related to this transaction will amount to approximately EUR 375 million.

Through this transaction, Numico also significantly reduces its exposure to the US dollar. As a consequence, Numico will unwind its USD-related interest rate swaps thereby adversely impacting shareholders’ equity by approximately EUR 50 million.

Given the historical and expected future profits, Numico remains confident that it will be able to sufficiently strengthen its shareholders’ equity through profits within the next 2-3 years and that negative shareholders’ equity will not have any impact on Numico's operations, access to funding or stock exchange listing.

GNC, based in Pittsburgh (US), is the world’s largest company in the production, marketing and sales of nutritional supplements with total net sales of EUR 625 million in the first half of 2003. Normalised EBITA in the first half of 2003 amounted to EUR 48 million. GNC employs 15,200 people and comprises of an international retail network of 5,750 company-owned and franchised stores and two production facilities in the US. The intended sale will be inclusive of GNC’s production facilities, warehouses and brands.

Apollo Management, L.P., founded in 1990, is among the most active and successful private investment firms in the U.S. in terms of both number of investment transactions completed and aggregate dollars invested. Since its inception, Apollo has managed the investment of an aggregate of approximately USD 17 billion in equity capital, including USD 13 billion invested in corporate transactions, in a wide variety of industries, both domestically and internationally.

Royal Numico N.V. is a leader in specialised nutrition, including baby food, clinical nutrition and GNC (nutritional supplements). The company operates in over 100 countries and employs approximately 26,500 people.

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