Herbalife Ltd. (NYSE: HLF) shares traded up about 4
percent during Thursday's after-hours session.
The reason? Headlines suggesting the company's management is working on a plan to refinance.
According to Bloomberg, Herbalife is in talks for a $1.2 billion term
loan and a $1.175 billion refi. Bloomberg said Herbalife will hold a bank meeting on Friday, January 20, to discuss details of a
deal.
Considering the post-market action in the stock, it appears investors are liking the news... but why? What could Herbalife do
with such a refinancing effort?
While these are only speculation, here are a couple of ideas.
A Transformative Acquisition
Herbalife's struggle with gaining wide-spread retail distribution is nothing new to investors. Buying a major player in the
nutritional retail space could get its products in front of more users and potential users.
A Large-Scale Buyback
Given Herbalife's current market cap of just under $5 billion, management could use a buyback of its own shares to effectively
reduce its share count by more than 20 percent.
The stock traded recently at $53.55, up less than a percent in post-market action. Shares are up about 10 percent in the brief
year-to-date period.
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