GNC Acquisition Holdings Inc. plans to bulk up on capital for expansion through an initial public stock offering that could raise up to $350 million for the company.
The Downtown-based health products retailer said in a securities filing on Wednesday that it wants to add at least 4,800 company-owned and franchised locations to its store base in the United States and expand internationally, including in China.
GNC, which was publicly traded through most of the 1990s, said it envisions growing its e-commerce business and spreading the GNC brand into new outlets through partnerships such as the one that put its vitamins, herbal supplements and other items into about 1,900 "stores within stores" at Rite Aid pharmacies.
In the fragmented U.S. health stores industry, "Our estimate is they have 7 percent of the market," said George Van Horn, senior analyst with research firm IBISWorld Inc. of Santa Monica, Calif. "That makes them the largest, but it leaves a lot of small, independent operators, too."
GNC reported a profit of $69.5 million on revenue of $1.7 billion last year, compared with a $54.6 million profit on $1.66 billion in revenue in 2008.
Private equity fund Ares Corporate Opportunities Fund, plus an affiliate of the Ontario Teachers Pension Plan Board in Toronto and management hold all of the company's outstanding stock.
GNC was publicly traded from 1993 until 1999 and has had several ownership changes since then. Two previous attempts to sell stock, including one in 2006, were canceled.
Now, "they seem to be looking at acquiring additional capital to improve their competitive position on a variety of fronts," Van Horn said. "That is a challenge. The industry grew through the recession, but for someone to be competitive in the future, they have to maintain, if not enhance, their retail capabilities and online capabilities.
"And if they want to be a global brand, they have investment requirements for foreign growth as well."
GNC sells its vitamins and other nutrition supplements, plus foods and other products, through 7,100 company-owned and franchised stores and its gnc.com website. The company said it has modernized its product lines and packaging in recent years.
The health stores industry nationwide is expected to generate revenue of $16.55 billion this year, up 1 percent from 2009, with much of the growth due to an aging population that is seeking ways to prevent health problems. IBISWorld expects an annual growth rate of 2.4 percent over the next five years.
GNC's international revenue accounted for about 10 percent of its business as of 2008. A joint venture with Bright Food Group, a Chinese state-owned conglomerate, was announced in February, and details are being worked out, the company said in the filing.
The company partnered with PepsiCo this year to introduce Gatorade G Series Pro drinks, and with PetSmart to market an exclusive GNC line of pet supplements.
Supermarkets, mass merchandisers such as Wal-Mart and other retailers have muscled in on the health products business in recent years.
"What's happened is, so many different other places are promoting health foods, and they have more competition," said retail expert C. Britt Beemer of America's Research Group in Charleston, S.C. "You don't hear as much about them."
Beemer said consumers tend to view GNC products as good quality, but higher priced than some alternatives. "Basically, 74 percent of consumers say they are more sale-price-driven these days," he said. "They just don't see it at GNC."
Additional Information:GNC history at a glance
1935: Founded as a yogurt shop Downtown by entrepreneur David Shakarian
1960s: Shakarian renames his growing chain General Nutrition Centers, to capitalize on demand for health food
1993-99: Company is publicly traded
1999: Acquired by Dutch corporation Royal Numico NV, for $2.5 billion
2003: Sold to Apollo Management LP for $750 million
2004: Apollo plans a GNC public stock offering, but cancels it as the diet-products market slows
2005: Joseph Fortunato, a 15-year GNC veteran, becomes the fourth CEO in less than a year
2006: A second attempt at a stock offering is canceled in mid-August
2007: Apollo Management sells its 97 percent interest in GNC for $1.65 billion to the Ontario Teachers Pension Plan and Ares Management LLC
Sept. 29, 2010: GNC again files for a stock offering.
