Herbalife to purchase $600 million worth of stock
Herbalife (HLF) stock rose 9.8% and closed at $68.04 on Monday, August 21, 2017, following the company’s announcement of a buyback of $600.0 million worth of its own shares. Herbalife also held talks with financial investors to take the company private. Although it didn’t announce the name of the investor, it stated that the discussions ended on August 16—without a deal.
Following the failed attempt, Herbalife announced a self-tendered modified Dutch auction to repurchase $600.0 million worth of its outstanding shares in the price range of $60–$68. Under the auction plan, investors who opt to sell their stock to the company will get a guarantee through the contractual contingent value right to receive an additional cash payment if Herbalife gets acquired in a private transaction at a higher price.
Herbalife also stated that the company’s largest investor, Carl Icahn, and his investment company, along with Herbalife’s board of directors and executives, would not tender their shares in the auction process. Icahn agreed not to increase his stake in the company beyond 50.0% until he decides to acquire a 100.0% stake in the company.
YTD stock performance
Herbalife stock has risen 41.3% on a YTD (year-to-date) basis as of August 21, 2017. The company has not only outperformed its peers in terms of stock price gains but has also exceeded the S&P 500 Index (SPX-INDEX). In comparison, Nu Skin Enterprises (NUS) stock has risen 20.2% since the beginning of the year. Vitamin Shoppe (VSI) and Usana Health Sciences (USNA) stocks fell 75.8% and 6.2%, respectively, during the same period. In comparison, the S&P 500 has risen 8.5% on a YTD basis.
The YTD rise in Herbalife stock dented the performance of activist investor William Ackman’s Pershing Square Capital Management. Ackman shorted Herbalife stock and publicly contradicted Icahn while declaring Herbalife a pyramid scheme.