| PHILADELPHIA/HONG KONG
PHILADELPHIA/HONG KONG China's Bright Food Group Co is near a deal to buy U.S. vitamin retailer GNC Holdings Inc, giving the well-known foreign brand a potential entry to China to cater to the country's growing middle class.
Under the deal being discussed, Bright Food would purchase GNC for $2.5 billion to $3 billion, a source familiar with the situation said late on Monday in the United States.
The potential acquisition of Pittsburgh-based GNC, which is owned by Ares Management and the Ontario Teachers' Pension Plan Board, could be announced in the next few days, said the source who declined to be identified because the talks were not public.
A spokesman for Shanghai-based Bright Food Group had no comment.
China has been aggressively snapping up overseas assets in the resources sector to feed its fast-growing economy, but a purchase of GNC marks a less common instance of a major acquisition in the U.S. consumer space by a Chinese company.
Analysts were generally positive on the deal, saying it would help Bright Food, backed by the Shanghai city government, to catch up with domestic rivals in catering to the growing number of Chinese who have money to spend on more discretionary products such as vitamins.
Bright Food, best known for its dairy products, has been less successful in building its brand compared with other major rivals including Mengniu (2319.HK) and Yili (600887.SS), said Shaun Rein, managing director of China Market Research Group.
"If they buy strong foreign brands and then bring them back to China, they are able to catch up with the local competitors which have better brands in their products category," he said.
"It is a very smart move because they need to be able to capture brands and technical expertise and products they currently don't have."
OTHER DEALS EXPLORED
GNC, which sells nutrition supplements, vitamins, sports drinks and other diet products through 7,100 stores worldwide, had been exploring an initial public offering, as well as an outright purchase.
In September, it filed registration papers with the U.S. stock regulator for an IPO to raise up to $350 million.
Ares Management LLC and the Ontario Teachers' Pension Plan bought GNC in 2007 from Apollo Management LP APOLO.UL in a deal with a total enterprise value of $1.65 billion. Apollo had twice previously tried to take GNC public.
Ares Management, and the Ontario Teachers' Pension Plan could not be immediately reached for comment.
Bright Food controls four listed companies, including Bright Dairy & Food Co.
Recently it was in talks to buy Britain's United Biscuits for about $3.2 billion. The company also recently lost a bidding war for Australian sugar refiner CSR(CSR.AX).
The GNC acquisition could also pose challenges for Bright Food, which has little or no experience managing a major foreign firm, analysts said.
"It's a good acquisition for them, but it will have difficulties in integrating the two companies from the management standpoint," said Rein of China Market Research Group.
(Additional reporting by Ilaina Jonas and David Lin; Editing by Richard Chang, Phil Berlowitz and Muralikumar Anantharaman)