A private investment group that owns more than a quarter of Herbalife Ltd., the Century City-based direct seller of nutritional and weight-loss supplements, has made a bid for the entire company, Herbalife said Friday.
J.H. Whitney & Co., which took Herbalife private in 2002 when it purchased the company with another investor, offered $38 a share in cash this time, valuing the company at $2.7 billion.
Since Herbalife went public again in 2004, its shares have more than doubled in price, making millions for Whitney and other Herbalife investors.
Whitney's latest offer was 15% higher than the $33.10 that Herbalife shares closed at Friday on the New York Stock Exchange. After the news was released in the late afternoon, the stock jumped to more than $39 in extended trading.
Whitney's bid, if successful, would mark the latest in a record string of corporate buyouts by private investors. Targets in recent months have included hospital giant HCA Inc., casino company Harrah's Entertainment Inc. and food-services firm Aramark Corp.
Private-equity firms are flush with cash from pension funds, wealthy individuals and other well-heeled investors seeking hefty returns on their money, market analysts say.
Herbalife is one of the most profitable direct sales companies in the world. It earned $101 million in the nine-month period ended Sept. 30 on revenue of $1.4 billion.
The company has grown rapidly in recent years, thanks in large part to sales in developing countries such as Brazil and Mexico. The latter now accounts for a larger share of Herbalife's business than the U.S. When investors sensed trouble with Herbalife's operations in Mexico last month, the stock plunged 24% in one day.
The company sells weight management pills and nutritional shakes, among other things, using multilevel marketing. Customers buy products directly from Herbalife for their own consumption and to sell to friends, family and acquaintances. They also receive commissions and discounts when they recruit others to do the same.
Because the enterprise doesn't require stores or sales staff, multilevel marketing offers low-cost business opportunities to scores of unemployed and underemployed people in developing countries, experts said.
Executives at Herbalife, which is incorporated in the Cayman Islands but operates out of offices in Century City, declined to comment on the buyout offer. A statement said a committee of independent directors of the board would review the offer.
New Canaan, Conn.-based Whitney declined to comment as well. In filings with the Securities and Exchange Commission, the investment group, which owns 27% of Herbalife shares, said it expected to borrow $2 billion to finance the purchase.
Whitney and San Francisco-based investment firm Golden Gate Capital Inc. acquired Herbalife for $700 million in 2002, putting up $176 million of their own money.
Shortly after the firm went public again in late 2004, it paid Whitney and Golden Gate more than $110 million in dividends, filings show.
After the value of the shares more than doubled in 2005, Whitney sold a large portion of its holdings, raising $233 million.