Daily News: February 14, 2018

JPMorgan Supports GNC, Harbin Partnership

GNC Holdings reached a strategic partnership and China joint venture agreement with Harbin Pharmaceutical Group. Under the terms of the agreement Hayao will invest approximately $300 million in GNC, becoming the single largest shareholder in the company. Additionally, GNC and Hayao have agreed to form a joint venture for the manufacturing, marketing, sale and distribution of GNC-branded products in China. CITIC Capital Holdings, as a major shareholder of Hayao, supported the transaction.

GNC also amended certain terms and extended the maturity date of its existing term loan facility due March 2019. According to a related 8-K filing, JPMorgan Chase served as administrative agent on the extension and the ABL term loan and revolver.

Upon effectiveness of the amendment, the maturity date of the term loans held by lenders consenting to the amendment will be extended by two years, the company’s existing revolving credit facility will be cancelled and GNC will enter into a new $100 million ABL revolver. The company will also issue a $275 million ABL term loan as part of the maturity extension. GNC has been in discussions with its largest term loan lenders, who have indicated their support for both the extension until March 2021 and the company’s entry into a new asset-based credit facility concurrently with the closing of the proposed amendment and extension.

The Hayao transaction is conditioned upon the successful completion of these negotiations.

“Today’s announcements represent important and exciting steps in our efforts to optimize our capital structure and build on our recent momentum as we position GNC to drive growth, improve financial performance and enhance long-term shareholder value,” said Ken Martindale, GNC CEO. “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 with Hayao 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.

China is the largest international market for supplements, and GNC is one of the most recognized brands by consumers in the market. As a player in China, Hayao provides established networks and relationships in the market which will support GNC’s efforts to expand in China, including the ability to accelerate product introduction by leveraging existing “Blue Hat” registrations required for sales in China. Hayao will provide GNC with access to a leading pharmaceutical distribution network in China as well as expertise in operations and manufacturing, which will serve as critical resources for GNC.

Goldman Sachs is acting as financial advisor, and Latham & Watkins as legal advisor to GNC. Morgan Stanley is acting as financial advisor to Hayao, with PingAn Securities acting as its PRC financial advisor. Junhe Law is acting as PRC legal adviser to Hayao. Ropes & Gray is acting as legal advisor to Hayao on matters concerning U.S. law.

Pittsburgh-based GNC Holdings is a global specialty health, wellness and performance retailer.

Headquartered in Harbin City, Heilongjiang Province, China, Harbin Pharmaceutical Group Holding is a pharma and VMS company in China.

Founded in 2002, CITIC Capital Holdings is an alternative investment management and advisory company.