Herbalife, the weight management and nutritional supplement company, is to be bought by two private equity firms, Whitney & Co and Golden Gate Capital, for around $685 million (€773.6m). The current Herbalife management will continue to run the company, despite the change of ownership.
Frank Tirelli, president and CEO of Herbalife said: "We believe the decision by two such high quality firms as Whitney and Golden Gate Capital to acquire Herbalife not only provides an excellent return to our stockholders, but benefits the company, its distributors and its employees as well. The merger provides a solid foundation with committed, long-term investors dedicated to the future success of Herbalife."
He continued: "As a private company, Herbalife will be able to focus all of its resources on its mission of improving peoples' lives by promoting wellness and health. We are confident that with the support of Whitney and Golden Gate Capital, the company will be able to further solidify its leadership position in the $50 billion per year wellness industry."
Completion of the transaction is subject to customary closing conditions, including approval by the Herbalife's shareholders and the securing of regulatory approvals. Whitney and Golden Gate have committed equity financing and have received debt-financing commitments in connection with the transaction, which is expected to close in the late second quarter or early third quarter 2002.
"Herbalife has always distinguished itself as being responsive to distributor needs as it brings to consumers outstanding health and wellness products under a great brand," said Peter Castleman, chairman & managing partner of Whitney & Co. "We are excited to partner with management and key distributors to invest in Herbalife's future."
"Herbalife is a solid company with a professional management team, a wealth of distributors worldwide, and a loyal customer base," said Jesse Rogers, managing director of Golden Gate Capital. "Under the direction of this management team, we believe it is possible to create new and greater opportunities for the company's distributors, while also managing the company more effectively."
Herbalife claims to be one of the largest weight management and nutritional supplement firms in the world, and offers a wide range of weight management products, nutritional supplements and personal care products intended to support weight loss and a healthy lifestyle. It has businesses in 54 countries worldwide, and markets its products through a network marketing system comprising approximately one million distributors. It had sales of around $1.7 billion in 2001.
The deal comes two years after the death of the company's founder, Mark Hughes, and marks the end of difficult period for the company. Following Hughes' death, Herbalife was torn by rivalries between the company's senior management, combined with a decline in sales. However, with the appointment of a new management team last year, the business of negotiating a sale or partnership got underway, resulting in the current deal.
The deal is subject to a $27 million break-up fee, with either company allowed to terminate the deal if it is not completed by 31 August. According to an official document filed with the US Securities and Exchange Commission, this date can be extended, but not beyond 30 November.
The document said that Herbalife would be responsible for the fee if an alternative deal has been publicly announced, and the deal is terminated because it has not been completed by 31 August. It will also be responsible for paying the fee if Herbalife's shareholders fail to approve the deal or if the company commits an incurable breach of contract. The break-up fee would also apply if Herbalife were to enter into an alternative deal within 12 months of the termination and then completes that deal.