Shares of Herbalife (HLF - Free Report) popped 11% in morning trading on Monday after the company said that it held talks to go private last week, but discussions ended without a deal.
According to a company statement, Herbalife had discussed a deal with a “prospective financial investor” until August 16th. The name of the investor has not been disclosed. While talks have currently ended, it is possible for them to resume.
The nutritional supplement company also said in the statement that it is starting a self-tender offer through a “modified Dutch auction” to buy shares back from shareholders at the lowest price possible. Herbalife plans to buy back $600 million worth of shares, setting a range of $60 and $68 per share.
To provide incentive for shareholders to participate in the offering, Herbalife said it will give all participating shareholders a contingent value right, or CVR. The CVR will act as a sort of insurance policy for investors who sell the company their shares by giving them the right to collect an additional payment from Herbalife if the company is acquired in a private transaction within two years.
Additionally, the financier Carl Icahn, Herbalife’s largest shareholder, has agreed to keep his stake below 50 percent unless he decides to buy the company outright. Icahn currently owns about 24 percent of Herbalife’s outstanding shares.
Some investors believe that Icahn, owner of Icahn Enterprises , could be the private investor interested in buying the company. Last year, he told Fortune that he was thinking about buying the company, saying, “Would I do an offer? I would consider. It’s something that I’ve thought about.”
Icahn is also known for publicly fighting Bill Ackman, the founder of Peshing Square Capital Management, who is a vocal critic of Herbalife since its IPO in 2012. Ackman’s hedge fund shorts Herbalife’s stock because Ackman argues that the multi-level marketing business is a pyramid scheme. Herbalife’s rising stock price is a blow to Ackman’s hedge fund.
Herbalife said that its self-tender offering will expire on September 19th.
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