Herbalife Shares Surge After It Struck Settlement Deal With FTC

Herbalife Ltd. HLF revealed it struck a settlement deal with the Federal Trade Commission (FTC) enabling it to resolve multi-year investigation. According to the company, the settlement terms did not alter the business model as a direct selling company, but did set fresh standards for the industry. The agreement means the FTC investigation is over. Following this, shares of the company surged more than 15 percent.

As part of the settlement agreement, Herbalife and the Attorney General of Illinois reached a settlement. Accordingly, the company will pay $3 million as part of this separate agreement. The company indicated that with the completion of the Illinois investigation, it is not aware of any other investigations.

Its chairman and CEO, Michael Johnson, commented about the settlement: "The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully otherwise we would not have agreed to the terms."

Related Link: What Does Carl Icahn Think Of Herablife's FTC Settlement?

Herbalife said that as indicated earlier in its public disclosure on May 5, the company also agreed to make a $200 million payment to the FTC as part of the settlement.

The company said that it still believes number of the allegations made by the FTC were factually incorrect. However, it believes the settlement was in its best interest because of the financial cost. Also any distraction of protracted litigation would have been considerable.

Herbalife said it had been cooperating with the FTC's investigation for more than two years, and it wanted to move forward. Additionally, its management could focus all of its energies on continuing to build the business, as well as, exploring strategic business opportunities.

The company indicated that the settlement terms are applicable only to its sales in the United States, which comprise about 20 percent of total net sales. The company agreed to follow fresh procedures and enhancements to some policies, which exist currently, as part of the settlement.

Herbalife also indicated that several of the terms agreed to were either being contemplated by it already or are extensions of practices in place and would be executed in the next 10 months.

Shares of the company were up 8.46 percent to $64.38 at time of writing.

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