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GNC cancels auction, plans sale of company to Chinese investor

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Bankrupt GNC Holdings Inc. disclosed Monday it was cancelling a scheduled auction and designating its investor Harbin as the successful bidder.

GNC Holdings Inc. on Monday cancelled a scheduled auction for its assets, advising a U.S. Bankruptcy Court that it did not receive any qualified bids other than from an affiliate of its largest shareholder.

The Pittsburgh-based supplements retailer plans to sell itself to China-based Harbin Pharmaceutical Group Holding Co. (Harbin), which previously invested $300 million in GNC.

In a court filing, GNC disclosed it was cancelling a scheduled auction and designating Harbin as the successful bidder. A hearing to consider approval of the sale to Harbin is scheduled for Sept. 17 at 10 a.m. before U.S. Bankruptcy Judge Karen Owens in Wilmington, Delaware.

Some Republicans in Congress from Florida—including Sen. Marco Rubio and Rep. Bill Posey—have raised national security concerns over the planned sale to Harbin, requesting a review of the transaction by the Committee on Foreign Investment in the United States (CFIUS).

GNC moved in June to restructure its business through a Chapter 11 bankruptcy petition and reached an agreement in principle to sell the business to Harbin for $760 million in cash and debt.

"Harbin is a long-time and trusted partner of GNC, and we are excited to move forward with them in this process as we seek the Court’s approval of the transaction," a GNC spokesperson said Monday. "We are pleased with the confidence our lenders and business partners have shown in the future of GNC throughout this process and are confident we will emerge a stronger business to the benefit of our associates, consumers, franchise partners and other stakeholders."

In a Sept. 4 court filing, lawyers representing a committee of GNC's unsecured creditors argued the nutrition company failed to satisfy its burden to show "the proposed sale is for an adequate price and was conducted in good faith, particularly when reviewed under the heightened level of scrutiny that applies to insider sale transactions." 

Jeffrey Cohen, one of the attorneys who signed the filing, said in an email Monday that the committee is engaged in talks "with the core parties in an effort to resolve our objections."

"Given the confidential nature of those discussions, it’s premature for me to share any details or discuss how we anticipate the court ruling on Thursday," he added.

In a regulatory filing, GNC said it expects "to emerge from the Chapter 11 proceedings early in the fourth quarter of 2020."

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