Herbalife shares climb above takeover offer

Shares of Herbalife Ltd., which sells dietary and weight-loss supplements, rose above the $38-a-share offer by private-equity firm Whitney & Co., its largest shareholder.

The shares rose $7.02, or 21%, to $40.12. Whitney’s offer, disclosed late Friday, was 15% more than the closing price of Herbalife shares that day and valued the company at $2.7 billion. The company is based on Grand Cayman Island but has its headquarters in Los Angeles.

The cash takeover bid by New Canaan, Conn.-based Whitney, which owns 27% of Herbalife, took advantage of a significant fall in the company’s shares, A.G. Edwards & Sons Inc. analyst Andrew Speller wrote in a report. The shares fell 24% to $29.74 on Jan. 5, when Herbalife said sales would rise 6% to 10% in 2007, compared with forecast growth of 10% to 15% in a Nov. 6 report.

“We feel a buyout offer of $38 per share is too low,” based on the belief Herbalife shares should be valued in the mid-$40s, Speller wrote Monday. He urged the board to reject the offer. His report said he didn’t own shares in the company.

Although Herbalife may fetch more than the Whitney bid during the next year or so, it was difficult to see a higher valuation with the offer “appearing to be fairly reasonable and the likelihood of a strategic buyer seemingly low,” Avondale Partners Managing Director Douglas Lane wrote in a report.