September 18, 2017 - 12:01pm EST by
2017 2018
Price: 67.64 EPS 4.77 0
Shares Out. (in M): 94 P/E 14 0
Market Cap (in $M): 6,376 P/FCF 18.5 0
Net Debt (in $M): 664 EBIT 581 0
TEV (in $M): 7,040 TEV/EBIT 12.50 0

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Herbalife is currently doing a tender offer for $600m in stock (~10% of their outstanding shares) that expires tomorrow, 9/19/17.  The tender is for a range of prices between $60 and $68 and the current price ($67.66) is trading just above the max tender price of $68.  However, the interesting part is that you get one CVR for each share of HLF that you tender.  The CVR is a little unique in that it has a two year expiration, is non-transferrable, and only pays in the event that HLF is taken private over the next two years at a premium to the tender price.  Given Icahn's ~25% ownership today, and based on his recent efforts to slowly take private Tropicana Entertainment, I'd view the odds of this as greater than 50%.

So, there are two ways to play this:

Option a- buy 99 shares as a PA trade in order to ensure odd-lot priority.  Tender tomorrow and at the current price, you get paid $40 to own 99 CVRs.

Option b- buy more than 99 shares to make this a decent size position and then sell the returned shares post tender.  Based on some of these recent tenders, such as CIT last spring (88.6% accepted for a purchase of 28.3% of shares outstanding), White Mountains 81.5% accepted for a purchase of 13.5% shares outstanding), I'd say north of 50% chance the prorata amount is 85% or below.  Based on a 9% decline to the pre-tender price of $62, this probably doesn't make sense but thought I'd flag it in case anyone is going for a larger size 


Details of orignal tender here:


Amended one (just changed the ability to cancel the tender outside of a range)



I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


-Tender offer tomorrow

- M&A over the next two years

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