Herbalife to Pay $200 Million Over Claims of Misrepresentation
July 15 2016 - 9:00AM
Dow Jones News
Herbalife Ltd. is to pay $200 million in a settlement with the
Federal Trade Commission that will enable the company to avoid
being classified as a pyramid scheme, a victory in its long-running
battle with activist investor William Ackman.
The settlement, expected to be announced Friday, is a dramatic
twist in one of Wall Street's biggest fights in recent years. It
could worsen a dismal stretch for Mr. Ackman's Pershing Square
Capital Management LP.
The settlement will require the nutritional-products company to
improve disclosures about its distributors, according to people
familiar with the matter. It also will tie distributor compensation
to actual retail sales and force the company to collect receipts,
the people said.
That will force the company to prove it has underlying users who
drink its protein shakes, something it hasn't disclosed and that
was at the crux of the debate that Mr. Ackman stoked about its
business model.
But while those agreements will cause shifts in its business,
and possibly across the direct-selling industry, the FTC isn't
accusing it of being the kind of fraudulent scheme Mr. Ackman and
others have claimed for nearly four years.
Shares of Herbalife, up nearly 13% over the past year, rose 5.1%
to $62.38 in premarket trading.
Brent Kendall contributed to this article.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
July 15, 2016 08:45 ET (12:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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