Herbalife, the nutritional supplements company under attack by the activist hedge fund manager William A. Ackman, said on Monday that it would increase its share buyback plan by $500 million.
The company said it planned to buy back $1.5 billion worth of shares, an increase from the previous plan to repurchase $1 billion of shares. To finance the buyback, Herbalife announced plans to offer $1 billion of convertible senior notes to institutional investors.
Herbalife also gave an estimate of its profitability in the fourth quarter of 2013. The company said its earnings on an adjusted basis would probably come in at $1.26 to $1.30 a share, higher than the estimate of $1.17 a share by analysts surveyed by Thomson Reuters. The official results will be announced on Feb. 18.
Still, Herbalife estimated that its results in the current quarter would fall short of analysts’ predictions. The adjusted earnings are likely to be $1.24 to $1.28 per share, Herbalife said. Analysts surveyed by Thomson Reuters expected earnings of $1.40 a share.
Investors reacted positively to the announcements, pushing Herbalife stock up about 4 percent at the start of trading on Monday.
Herbalife is closely watched on Wall Street because it is the target of a $1 billion short-selling bet by Mr. Ackman, chief executive of the hedge fund Pershing Square Capital Management, who contends that the company is a pyramid scheme. Herbalife has denied his assertions, and its stock rose last year as it reported several quarters of better-than-expected results.
But Herbalife stock came under pressure last month when Senator Edward J. Markey, Democrat of Massachusetts, sent letters to federal regulators urging them to investigate the company. “I have seen reports from Massachusetts residents that suggest Herbalife is a pyramid scheme,†Mr. Markey wrote.
The increased share buyback reflects Herbalife’s continuing effort to buttress its stock price. When the stock rises, it puts pressure on Mr. Ackman.
The investors in Herbalife’s convertible notes will be Bank of America Merrill Lynch, Credit Suisse, HSBC and Morgan Stanley, the company said on Monday, adding that it would give the investors the option to buy an additional $150 million of notes. The notes will mature on Aug. 15, 2019.
Herbalife’s previous share repurchase plan had an available balance of $653 million, the company said. In addition to financing the share buyback, proceeds from the offering of convertible notes will go toward “working capital and general corporate purposes, including, without limitation, the repurchase of outstanding common shares,†Herbalife said.
