GNC sells manufacturing arm to IVC
IVC, or International Vitamin Corporation, is backed by a consortium of Chinese investors. IVC subsidiary, which is based in Irvine, CA, has been snapping up supplement manufacturing operations in the North American market for a while now. In 2016, the company bought the supplement manufacturing arm of Perrigo. In 2014, the company bought contract manufacturer Adam Nutrition.
Deal worth more than $170 million
“Under the terms of the agreement, GNC will receive $101 million from IVC and contribute the net assets of the Nutra manufacturing facility and Anderson facility in exchange for an initial 43% ownership in the joint venture,” said Ken Martindale, GNC’s chairman and CEO.
“Over the next four years, GNC will receive an additional $75 million from IVC as IVC’s ownership of the joint venture increases to 100%. The joint venture will be responsible for the manufacturing of the products currently produced by Nutra. This strategic partnership with IVC gives us access to their industry-leading experience and expertise, greatly increases our manufacturing capacity and lets us leverage the collective buying power of the two organizations,” he continued. Martindale’s comments were part of an earnings call with analysts that was posted in transcript form on the site seekingalpha.com.
“This venture demonstrates the value of our differentiated manufacturing platform. GNC, one of the most trusted and innovative supplement brands in the world will now have the ability to devote even greater resources to new product development and brand expansion, while IVC's manufacturing expertise will deliver unmatched quality at the most competitive costs,” said Stephen Dai, president and CEO of IVC.
IVC now directly owns and operates manufacturing and distribution centers throughout the United States, in Europe and in China.
In the earnings call Martindale also said that GNC has now received the final $150 million tranche of a $300 million investment from Harbin Pharmaceutical Co. With the investment now complete GNC and Harbin will form two joint ventures, one focused on Hong Kong and the other in mainland China, Martindale said. This will give GNC access to Harbin’s pharmacy sales channel, he added.
Falling revenue
Despite the big news on the corporate structure front, GNC’s financial report was disappointing. The company recorded $547.9 million in sales in the fourth quarter of fiscal 2018, compared to $562.8 million a year previously.
But to balance that Tricia Tolivar, GNC’s CFO, said the company has reduced its debt by $500 million in the past 16 months.
However, stock traders seemed unimpressed by the company’s partnerships and debt restructuring. The company’s share price declined more than 16% in the hours after the earnings announcement. The stock opens trading today at $2.72, down from a 52-week high of $4.43 achieved last October, and from an all-time high of more than $60 a share in late 2013.
