Current Price – $95.4
Tender Price – TBD
Upside – TBD
Expiration Date – Q2 2018
This potential upcoming opportunity was highlighted by Sean.
Herbalife intends to launch tender offer to repurchase $450m-$600m of stock. Tender prices have not been announced yet, but some might be interested in trading this on the basis of how 2017 Aug tender offer worked out.
2017 August Tender
– Announced on 21st of August 2017. Document here.
– Terms: $600m at $60-$68/per share.
– Pre-announcement price $62.
– Post announcement price $68.
– Price at tender expiration $67.6.
– Offer ended up under-subscribed and only $458m worth of stock was repurchased at $68.
– After tender results were announced share price shot up to $75.25.
– There was odd-lot provision as well.
So there is a way to play this before the tender announcement with expectation that share price will again shoot up closer to the upper limit. This tender offer does not really open any additional opportunities for the larger shareholders to liquidate – e.g. yesterday’s volume was almost $200m or 1/3 of the current tender allocation, so larger shareholders do not really need tender offer to be able to exit.
Risks:
– Exposure to ST price movement before the tender details are announced.
– Uncertain timing – press release says the transaction will be completed in Q2 2018. Most likely tender details will already be announced in March.
– Share price has already run up from $87 to $97 post the announcement (quite likely in the anticipation of above tender dynamics and continued short squeeze).
Will Carl Icahn participate this time?
Tender details announced:
– Pricing $98-$108 per share
– Tender Offer value of $600m (c. 7% of outstanding shares)
– Expiration on the 16th of May, 2018
– There is odd lot priority
– Insiders will not participate in the tender (6% ownership)
– Carl Icahn Enterprises (27% shareholder) entered into agreement not to acquire additional shares till 10 days after tender expiration – potentially hinting that IEP will also not participate in the tender.
https://www.sec.gov/Archives/edgar/data/1180262/000119312518120295/d555178dex99a1a.htm
Tender Offer extended to 24th of May
https://www.sec.gov/Archives/edgar/data/1180262/000119312518139338/d553183dex99a5b.htm
HLF trades above upper tender limit after Q1 results announcement.
My guess is that tender offer prices will be updated shortly.
5/16/18 — Company’s recently implemented two-for-one stock split, the cash purchase price in the tender offer shall not be greater than $54.00 nor less than $49.00 per share.
https://www.businesswire.com/news/home/20180516006302/en/Herbalife-Nutrition-Announces-Adjusted-Price-Range-Dutch
Final tender price $52.5 (or $105 pre-split) with 23% proration. This trade resulted in $500 gain for odd lot holders from the write-up price.
For those who liquidated the position right after Q1 result announcement when shares were trading above the upper limit, this trade resulted in gain of $1300.
https://www.sec.gov/Archives/edgar/data/1180262/000119312518175163/0001193125-18-175163-index.htm