Bloomberg: Herbalife Pulls Strategy from Ackman Playbook

Photo above: The Herbalife Ltd. logo is displayed outside of the company’s corporate headquarters in Torrance, California.
(Photographer: Patrick Fallon/Bloomberg)

A recent Bloomberg report indicates that Herbalife executives have been taking notes amid Bill Ackman’s year-long campaign attacking the company’s business model and lobbying federal agencies to investigate its practices. According to the report, Herbalife is partnering with investment bank Moelis & Co. to approach select Pershing Square clients and urge them to pull out as the investor’s “risky and irresponsible” bet persists.

People with knowledge of Herbalife’s strategy told Bloomberg that Moelis has reached out to New Jersey’s $76.7 billion pension fund, which has invested with Ackman to the tune of $207 million. The company also reportedly has plans to meet with hedge fund advisors at Cliffwater LLC, a California-based firm. None of the parties involved responded with comment to Bloomberg.

“Activism on the short side is a relatively new phenomenon so there are also new strategies for companies under attack to fight back,” said Brad Balter, whose Boston-based Balter Capital Management oversees hedge fund investments for its clients.

Bloomberg also reported last week that Carl Icahn, the company’s largest investor, has no intention of selling the stock now that the lock-up provision on his shares has expired. The provision, in accordance with insider-trading regulations, restricts when Icahn can buy and sell the stock. “The company has spoken with Mr. Icahn, and he has no present intention to sell,” Herbalife spokeswoman Barbara Henderson told Bloomberg in an email.

Herbalife stock, which has climbed more than 100 percent this year, received another bump last week following a favorable ruling passed down by a Belgian appeals court. A lower court ruling in 2011 said that the company operated an illegal business model, but the appeals court determined that the company stands “in full compliance with the law.”

Read more on Herbalife’s latest strategy from Bloomberg.

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