Why Chinese Bright Food Group wants to buy GNC Holdings Inc?
Chinese food company Bright Food Group Co. is nearing a deal to acquire U.S.-based vitamin retail chain GNC Holdings Inc. for between $2.5 billion and $3 billion. Last year, GNC’s net income totaled $69.5 million on $1.71 billion in revenue. The Pittsburgh-based company filed papers in September for a $350 million initial public offering.
GNC Holdings Inc, which is owned by Ares Management and the Ontario Teachers’ Pension Plan Board sells nutrition supplements, vitamins, sports drinks and other diet products through its global network of about 7,100 stores. Bright Food is one of China’s largest food and dairy companies. Recently it was in talks to buy United Biscuits for about $3.2 billion.
China has been aggressively snapping up overseas assets in the resources sector to feed its fast-growing economy, but a purchase of GNC marks a less common instance of a major acquisition in the U.S. consumer space by a Chinese company.
It would help Bright Food, backed by the Shanghai city government, to catch up with domestic rivals in catering to the growing number of Chinese who have money to spend on more discretionary products such as vitamins.
If Bright Food Group Co. buy strong foreign brands and then bring them back to China, they are able to catch up with the local competitors which have better brands in their products category. At least two banks are providing the financing for Bright Food, and more firms may join the financing group.