Herbalife Ltd. (NYSE: HLF) has been under fire for years with many investors betting against the firm calling it a scam or a pyramid scheme. Notable among those betting against it is Bill Ackman of Pershing Square Capital Management. However, Herbalife might have found a way out of the spotlight.
In an unforeseen move, Herbalife announced Monday morning that it would be commencing a “modified Dutch auction” self-tender offer to purchase up to $600 million of its shares of common stock for no less than $60 and no greater than $68.
It was also said in the announcement that for each share tendered, shareholders will also receive a non-transferable contractual contingent value right (CVR) allowing participants in the tender offer to receive a contingent cash payment should Herbalife be acquired in a going-private transaction within two years of Monday’s commencement of the tender offer.
The board of directors determined that the tender offer is an appropriate way to return capital to shareholders seeking liquidity under current market conditions. At the same time, the offer provides the tendering shareholders potential additional value in the event Herbalife is taken private within two years.
Management noted that Herbalife has been in talks recently that may have considered going private as a very real possibility. So in a sense the board has provided protection for tendering shareholders in the event that Herbalife is taken privte.
John DeSimone, CFO of Herbalife, commented:
Our Board and management team are committed to enhancing shareholder value and we believe today’s action is just one more step in meeting this goal. We have already acquired during 2017 approximately $299 million of our shares on the open market under our current $1.5 billion share repurchase plan, and we believe this tender offer provides us an efficient way to buy back additional shares at an attractive price.
Excluding Monday’s move, Herbalife has outperformed the broad markets with the stock up about 29% year to date. However, over the past 52-weeks the stock is actually down 3%.
Shares of Herbalife were last seen up about 8% at $67.08, with a consensus analyst price target of $83.50 and a 52-week range of $47.62 to $74.49.