GNC Holdings, Inc. (NYSE:GNC) priced its 20 million share follow-on offering at $24.75, a discount of 35 cents from the closing price, on Tuesday. All of the shares offered are secondary shares offered by selling shareholders including: Ares Corporate Opportunities Fund II, L.P., Ontario Teachers' Pension Plan Board, and certain directors and executive officers of the company. Post offering, Ares and Ontario Teachers’ will own 20.57% and 26.22% of the common stock respectively. Lead underwriters on the offering are Goldman Sachs, J.P. Morgan, Deutsche Bank, and Morgan Stanley.
GNC Holdings, Inc. is a leading global specialty retailer of health and wellness products, including vitamins, minerals and herbal supplements (VMHS) products, sports nutrition products and diet products. GNC has been one of the private equity IPO success stories of 2011. The secondary offering price is approximately a 55% premium to its IPO price of $16.00, which commenced trading on April 1. On the IPO, only 6.5 million of the 22.5 million shares were offered by selling shareholders (plus the underwriters’ overallotment option of an additional 3.375 million shares from selling shareholders). The company was acquired in 2003 by private Equity firm Apollo for $750M. Apollo subsequently sold GNC in 2007 to private investment groups Ares Management and Ontario Teachers Pension Plan for a total enterprise value of $1.65B. At the current offering price of $24.75, GNC has an enterprise value of approximately $3.38 billion, and a market cap of $2.63 billion.
GNC just reported strong third quarter results on October 21, with consolidated revenue of $538 million, adjusted EBITDA of $94.7 million, net income of $48.7 million, and diluted EPS of $.46. The quarter represented the company’s 25th consecutive quarter of positive domestic same store sales growth. The company also issued its outlook for the full year 2011: approximately $2.05 billion in total revenue (up 12.5% over 2010), adjusted EBITDA of approximately $334 million (up 26% from 2010), and adjusted EPS on a diluted share basis of approximately $1.45. These figures are all increases from the company's previous outlook, which called for a revenue increase of 9-10%, adjusted EBITDA increase of 18-19%, and adjusted EPX of $1.28 to $1.30.
Though the stock still has some overhang from additional shares that may come to market from time to time from the existing private equity shareholders, based on the current valuation it appears the stock may still have room to run. On a valuation basis, at the $24.75 price GNC is trading at 17x 2011 estimated adjusted EPS. Often looked at as a comp, though not necessarily a true direct competitor, Vitamin Shoppe (NYSE:VSI) is currently trading at approximately 26x 2011 estimated EPS.