Supplement and nutrition company Herbalife (HLF 68.70, +6.75) trades about 10.9% higher this afternoon as news broke this morning that the company, which had been in talks regarding a going private transaction, had terminated said talks as of August 16. HLF also announced the commencement of a “modified Dutch auction” self-tender offer to purchase for cash up to an aggregate of $600 million of shares of its common stock at a per share price not less than $60.00 nor greater than $68.00.
Additionally, sending shares higher today is news that investor Carl Icahn (along with certain affiliates) had entered into an agreement with HLF this morning pursuant to which the Icahn Entities agreed, among other things and for the two years following commencement of the tender offer, to not increase their aggregate beneficial ownership above 50% of HLF’s outstanding common shares unless they have agreed to acquire 100% of its outstanding common shares.
Further, demonstrating their commitment and belief in the long-term success of HLF, members of the Board of Directors, HLF executive officers and Carl Icahn, the company’s largest shareholder, have all advised that they do not intend to tender shares into this tender offer.
Per this morning’s announcement, HLF has agreed to commence a “modified Dutch auction” tender offer in the amount of $600 million of shares of its common stock at a per share price not less than $60.00 nor greater than $68.00. For each share tendered, shareholders will also receive a non-transferable contractual contingent value right allowing participants in the tender offer to receive a contingent cash payment should HLF be acquired in a going-private transaction within two years of today’s commencement of the tender offer. The offer stands until the close of business on September 19, 2017.
These headlines are the latest chapter in the saga which began somewhere this past September when it was revealed that Mr. Icahn had expressed interest to the FTC for the right to buy 50% of HLF shares. Then, about three months later on November 3rd in a formal filing, Mr. Icahn revealed he had upped his HLF stake to 23.05% from 20.78%. He then increased the stake again in a filing dated November 8 to about a 24.18% active stake. This brought Mr. Icahn’s stake in HLF to about 19.61 million shares from about 17 million the prior quarter. All of this has undoubtedly been a blow to fellow investor Bill Ackman, an investor whose Pershing Square has been short HLF (and vehemently stands by said short) since the start of the position back in 2012.
The company, which agreed to terms with the FTC in July of 2016 to pay $200 million to settle a case which delved into HLF’s business practices. Since that time, HLF stock has risen as much as 13% (as of June 2, 2017) but currently sit a comfortable 5% higher from those post-FTC investigation levels.