China's Bright Food Group Co. is close to a deal to buy U.S. vitamin retail chain GNC Holdings Inc. for between $2.5 billion to $3 billion, people familiar with the matter said, the latest sign of growing Chinese appetite for U.S. companies.
A deal for Pittsburgh-based GNC, which is owned by Ares Management and the Ontario Teachers' Pension Plan Board, could be announced in the next few days, the people added. But they cautioned that last-minute snags could delay or derail the deal, especially as the two sides are still hashing out a final contract.
Bright Food is among a growing list of state-backed Chinese companies that are scouring acquisition opportunities around the world, from shale gas to cookies. This is reordering the globe's M&A business, putting Chinese companies at the forefront of auctions in which their participation would have been unthinkable just years ago.
In October, Chinese offshore oil company CNOOC Ltd paid $1.1 billion for a stake in Chesapeake Energy Corp's Eagle Ford shale project in south Texas. China's Tianjin Xinmao Science & Technology Investment Group is in the midst of a bidding war for Dutch cable maker Draka, swooping in with a $1.3 billion bid that trumped offers from two of Europe's largest cable makers.
Bright Food, one of China's largest food and dairy companies, itself was in recent talks to buy snack maker United Biscuits for about $3.2 billion, but then turned its attention to GNC, said two of the people familiar with the matter.
GNC sells nutrition supplements, vitamins, sports drinks and other diet products through its global network of about 7,100 stores. Earlier this year, the company entered into a joint venture with Bright to help GNC sell its products in the fast-growing Chinese market.
GNC's current owners bought the company for $1.65 billion in 2007 from private equity firm Apollo Management.
The retailer initially attracted interest from private-equity firms, but has seriously pursued sale negotiations with Bright Food because the Chinese firm was willing to offer far more than the other suitors, one of the people said.
At least two banks are providing the financing for Bright Foods, and more firms may join the financing group, according to the people familiar with the matter.
For the first nine months of 2010, GNC reported net income of $78.3 million, reflecting a 37.6% increase from the same period in 2009. GNC's revenues through September were almost $1.4 billion, compared to about $1.3 billion in the first nine months last year.
Shanghai's Bright Food has more than 3,300 retail outlets, which include the NGS supermarket Jiegiang chain stores and the Guangmin convenience stores, according to its Web site. The company also has a strong presence as a seller of candy, sugar, honey products, rice wine and cigarettes.
Bright also has a food processing and agriculture business that involves breeding seeds, and producing meat, milk and vegetables. The company was established in 2006 and is a state-backed enterprise.
