Your Muscle Milk At GNC May Soon Be Owned By China. Senator Rubio Wants To Stop It.

Health food and body building chain GNC is bankrupt. Harbin Pharmaceuticals, the second largest pharma co in China, and a minority shareholder of GNC with five members on the board, wants to buy it. Florida Senator and China hawk Marco Rubio just threw a bucket of cold water on them.

Rubio sent a letter to U.S. Treasury Secretary Steven Mnuchin today to request a full review by the Committee on Foreign Investment in the United States (CFIUS) of the potential acquisition of GNC Holdings Inc. by Harbin, scheduled for final bidding in bankruptcy court proceedings tomorrow.

CFIUS decides if foreign ownership of an American based company is a security risk.

“The Chinese government engages in persistent efforts to obtain a broad range of sensitive American personal data through illicit means such as state-sponsored theft from government agencies and private companies,” he said in a statement Thursday afternoon. The acquisition of a major health and nutrition chain with over 5,200 retail stores in the United States and an expansive customer base presents the opportunity for state-directed actors to purchase this information legally. Efforts to obtain personal and sensitive data related to health information and financial transactions of U.S. persons must be reviewed with an understanding of the malign foreign policy and intelligence aims of the Chinese government and Communist Party.”

One issue surrounding GNC that may convince CFIUS that Harbin isn’t the right suitor is the fact that its stores are near or on dozens of military bases, including Andrews Air Force Base, Quantico, and 29 Palms. Harbin would then have access to their information, which is bankable if not subject to cybersecurity issues like data breaches and identity theft, something China has been accused of for years.

On September 3, 14 year old DC advocacy group and think tank, the Coalition for a Prosperous America, sent a letter to Treasury Secretary Steven Mnuchin asking for a CFIUS review of the GNC bankruptcy sale potentially going to Harbin, The Washington Examiner reported last week.

“This is exactly the type of acquisition that CFIUS was designed to review and to ensure that national security implications of foreign investments are not problematic,” the group’s CEO Michael Stumo and its chairman Dan DiMicco wrote in the letter.

GNC was founded in Pittsburgh over 90 years ago. It filed for Chapter 11 bankruptcy protection in June.

Harbin became closer to GNC two years ago, when they bought a minority stake for around $300 million underwritten by the Bank of China. Five seats on the board of directors came as part of the joint venture deal, according to lawyers on the case.

There is one known bidder outside of Harbin and that’s Dynamic Ventures, a little known Ohio-based group that invests in health and wellness companies.

But Harbin has the inside track because they’re already on the board and could potentially have a safe harbor as they’ve been in GNC before updates were made to the CIFIUS Foreign Investment Risk Review Modernization Act on August 13, 2018.

GNC and Harbin agreed to their JV on February 13, 2018.

China is already, of course, everywhere on the shelves of GNC stores. They are big supplier of GNC vitamins and Harbin would then own that supply chain point to point, a big savings for Harbin.

If CFIUS applies, then the bankruptcy court would not allow a Harbin winning bid.

Estimates in the market are for GNC to be sold for around $750 million to $800 million. If the Ohio firm is the only one left, they would need to come up with the money to pay for it, or ask for a 45-day extension to find it. Other companies have expressed interest in GNC in the past, but no other known players are on deck as of last week.

Rubio told Fox Business host Maria Bartiromo that data was the digital commodity everyone wants, and that includes GNC data.

“GNC holds data on millions of Americans that have been their customers,” he says. “Personal data is probably the most valuable commodity in the world today. Everything is going to be built on that, from the way we sell products, to the way we do medicine, and to give it to China…is a self-inflicted wound and that is why we care about the GNC sale. It’s not about the vitamins.”

GNC finally responded, after the story ran.

From a spokesperson:

“Nothing is more important to GNC than the trust of our customers. Our consumer data is safeguarded by rigorous standards and none of it is accessible to any foreign nationals. Harbin’s controlling stake in GNC was subject to thorough review for any U.S. national security implications by the Committee on Foreign Investment in the United States in 2018. That transaction was approved, and no facts or circumstances have changed to call the Committee’s support into question. We will continue to work with all relevant agencies throughout the restructuring process and maintain our rigorous standards for data privacy in compliance with all applicable law.”

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