(Reuters) - Herbalife Ltd (HLF.N) said it had started buying back up to $600 million of its shares in a modified Dutch tender offer, after talks with an investor to take the company private fell through.
The nutrition and supplements maker’s shares were up 9.3 percent at $67.70 in morning trading on Monday.
Herbalife said it would buy back shares for $60-$68 per share to “provide tendering shareholders with some protection” in case the company was taken private within two years for a higher price.
The self-tender offer includes a cash payment and a contingent value right (CVR) that would pay out another cash payment should Herbalife be taken private.
Herbalife held talks with a “major” private equity firm, CNBC’s Scott Wapner tweeted, citing people familiar with the conversation who also said talks could resume.
The company’s share buyback comes a week after a Chinese government regulator announced a three-month campaign against recruitment by pyramid schemes.
While China’s State Administration for Industry and Commerce did not name the companies in the report, the news sent the shares of Herbalife and other multi-level marketing companies, who have businesses in China, tumbling.
Herbalife’s tender is a show of confidence that its China business will not be impacted, Renaissance Macro Research analyst April Scee wrote in a note.
It also addresses investors’ disappointment in the cadence of its repurchase program which has been moving at a slow pace, Scee said.
The company, which announced a three-year $1.5 billion share buyback in February, had bought back only about 4.6 million shares till July.
Herbalife said its largest shareholder Carl Icahn, who has an about 24 percent stake, had agreed not to raise his ownership above 50 percent of Herbalife’s outstanding shares for two years.
Icahn and executives of Herbalife will not be tendering shares in this offer, the company said.
Activist investor William Ackman, who disclosed a $1 billion short position against the company in December 2012 alleging the company was operating a pyramid scheme, declined to comment on the matter.
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Arun Koyyur