GNC Tries Tame Re-IPO (GNC)

GNC Holdings Inc. (NYSE: GNC) is public again.  The vitamin and nutrients retailer sold 22.5 million shares at a price of $16.00 per share.  This was in the middle of the $15.00 to $17.00 indicated price range.

GNC has been public before.  Considering that this was a re-IPO, we welcome that the company did not get too high of a price out of the chute.  There are still at least some things here to consider.  GNC was not one of our Top 17 IPOs to Watch in 2011, although it should have been included at least in a passing mention.

Some 16 million shares were being sold by the company and 6.5 million shares are being sold by shareholders.  The selling stockholders granted the underwriters a 30-day overallotment option to purchase up to 3.375 million shares.  It does stand out that the overallotment is only from shareholders rather than from the company alone or at least from the company and holders combined. 

Some may wish that the use of funds was more pro-public-holder.  GNC expects to use about $240 million, together with cash on hand, to redeem approximately $223 million aggregate liquidation preference of its Series A preferred stock, to make a contribution to the General Nutrition Centers, Inc. subsidiary to repay about $300 million of outstanding debt under a senior credit facility, and also to pay approximately $11 million to satisfy obligations under its management services agreement and Class B common stock.

Goldman Sachs, J.P. Morgan, Deutsche Bank, and Morgan Stanley were the joint book-runners; and co-managers were Barclays Capital, Credit Suisse, William Blair, and BMO Capital Markets.

GNC was taken private by Apollo Management back in 2003 at about $750 million or so and was ultimately sold to firms Ares Management and the Ontario Teachers Pension trust for what was called about $1.6 billion or so if you include debt.  The at-IPO market capitalization for the company is more than $1.6 billion.

The overall stock market has lagged historical performance metrics if you back for more than a decade.  In this instance, you are buying a company that was taken private and the resold as a private company before it came public all over again.  That alone is not meant as a discouragement.  We just always tell investors, understand what you are investing in.

Investors are giving it a positive grade so far.  After an hour after the market open, GNC shares are up $0.39 at $16.39 and we have seen some 11.5 million shares trade hands.

JON C. OGG