SEC Comment Letter for HERBALIFE LTD. (HLF) (CIK 0001180262) (HLF) — Sep 27, 2017
HERBALIFE LTD. (HLF) (CIK 0001180262)
Date: Sept. 27, 2017 · CIK: 0001180262 · Accession: 0000000000-17-034350
AI Filing Summary & Sentiment
Referenced dates: September 7, 2017
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 DIVISION OF CORPORATION FINANCE September 26, 2017 Via Email Jonathan K. Layne Gibson , Dunn & Crutcher LLP 2029 Century Park East Los Angeles, CA 90067
Re: Herbalife Ltd . Schedule TO-I/A filed on September 18 , 2017 File No. 005-80216
Dear Mr. Layne :
The staff of the Office of Mergers and Acquisitions in the Division of Corporation Finance has conducted a review of the amended filing listed above and the response letter of the same date included with that filing. We have the following additional comments:
Schedule TO -I/A filed September 18 , 2017 – Item 10. Financial Statements
1. Refer to comment 1 in our first comment letter dated September 7, 2017 and your response. It appears that the Offer may cause your stockholders equity to become negative. Please disclose this pro forma effect.
Exhibit 99(A)(1)(A) – Offer to Purchase
How will the CVR amount be calculated ?
2. Refer to comment 9 in our first comment letter and your response. The new disclosure in this section in response to comment 9 seems to leave open the possibility that there are other factors besides those listed that could allow the Company to adjust the value of the CVR. For example, the use of the term “including” before the list of events such as a “reorganization, reclassification, combination of shares, recapitalization…” implies that there could be other events which could result in an adjustment. In addition, the phrase “and make certain other adjustments” after this list seems to indicate that the Company may retain discretion to make other changes that would impact the value of the CVR. While
Jonathan K. Layne , Esq. Gibson , Dunn & Crutcher LLP September 26, 2017 Page 2 we understand that whether the CVR will ultimately result in an ad ditional cash payment to tendering holders is not known at this time, the method by which the calculation would be determined should be fully described here. Please revise to describe, or advise.
Conditions of the Tender Offer
3. Refer to prior comment 20 and your response, including the revised language in the last bullet point on page 25. While we understand your response to mean that some triggering events could be knowable before the Expiration Time (such as if the Company receives notice that counter parties to the capped call or forward share repurchase transactions will make or will likely make negative adjustments to the consideration for such transactions), it is not clear how the Company could know before the expiration of the Offer that the CVRs “have a significant value.” Clarify the circumstances under which the Company could make this determination. For example, would this occur only if the Company is in negotiations for an extraordinary transaction which would trigger a possible CVR payment? (We would assume this fact would be required disclosure). Please revise or advise.
4. Refer to comment 21 in our first comment letter and your response. In addition, refer to our last comment above. Since the value of the CVR would be determined after the Offer expires, it is not clear to us how this Offer condition could be triggered /evaluated as of the Expiration Time. Please revise or advise.
Legal Matters; Regulatory Approvals
5. We note your response to comment 23 in our first comment letter. Please be aware, however, that three to five business days may not be sufficient time remaining in the Offer, depending on the materiality of the new disclosure you may disseminate. Please confirm your understanding.
Background and Reasons for Including a CVR in the Offer Consideration
6. Refer to comment 24 in our first comment letter and your response, including the expanded disclosure in this section. Since the consideration shareholders are being offered here depends in part on the potential value of the CVR, which in turn depends on whether a Going Private Transaction occurs within two years of the Expiration Time, explain why the Company terminated the ongoing discussions with Party A in Augu st 2017 (including any role that the financial advisor played in this decision) . In addition, explain why, when Party A indicated it was still interested in a transaction after receiving notice of termination from the Company, the Company did not reengage with Party A.
Jonathan K. Layne , Esq. Gibson , Dunn & Crutcher LLP September 26, 2017 Page 3
7. We note the new disclosure added to this section in resp onse to comment 24 in our first comment letter . Expand the descri ption of the significant steps taken by the Company during its interactions with Party A and the discussions and negotiations between the parties from November 2016. Some matters that should be address ed in the expanded disclosure include the following:
When did the Company engage a financial advisor , what was the advisor ’s role in the negotiations with Party A and otherwise , and what steps did it take during these discussions ? Did the financial advisor reach any conclusions wi th respect to Party A ’s interest in a transaction?
When did the Company grant Party A access to a data room and allow due diligence to be gin?
How long did due diligence proceed before being terminated by the Company?
Although no specific valuation was provided for the Company’s shares, what range of values was referenced by the parties and were there discussions specifically regarding the price per share in a potential transaction ?
After the parties entered into a nondisclosure agreement on December 23, 2016, what kind of information was share d with Party A?
8. With respect to the second bullet point in comment 24 in our first comment letter, we asked whether the “various parties” you referenced included either affiliates of the Company or of its control persons. Your revised disclosure in response addresses onl y affiliates of the Company itself. Please revise to respond fully to our original comment.
9. Refer again to comment 24 in our first comment letter and the revised disclosure in this section explaining how the Board set the two -year term for the CVR. In the new paragraph where you discuss the reasons for the two -year term, include the explanation you p rovided in the last paragraph of your response to this comment (in your response letter). (This disclosure relates to why the Board decided on a two -year versus a one -year term for the CVR).
Please amend your filing in response to these comments. We may have further comments upon receipt of your amendment; therefore, please allow adequate time after the filing of the amendment for further staff review.
Jonathan K. Layne , Esq. Gibson , Dunn & Crutcher LLP September 26, 2017 Page 4 Please direct any questions about these comments or your filing to me at 202 -551-3263.
Sincerely,
/s/ Christina Chalk
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
September 26, 2017
Via Email
Jonathan K. Layne
Gibson , Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, CA 90067
Re: Herbalife Ltd .
Schedule TO-I/A filed on September 18 , 2017
File No. 005-80216
Dear Mr. Layne :
The staff of the Office of Mergers and Acquisitions in the Division of Corporation
Finance has conducted a review of the amended filing listed above and the response letter
of the same date included with that filing. We have the following additional comments:
Schedule TO -I/A filed September 18 , 2017 – Item 10. Financial Statements
1. Refer to comment 1 in our first comment letter dated September 7, 2017 and your
response. It appears that the Offer may cause your stockholders equity to become
negative. Please disclose this pro forma effect.
Exhibit 99(A)(1)(A) – Offer to Purchase
How will the CVR amount be calculated ?
2. Refer to comment 9 in our first comment letter and your response. The new
disclosure in this section in response to comment 9 seems to leave open the
possibility that there are other factors besides those listed that could allow the
Company to adjust the value of the CVR. For example, the use of the term
“including” before the list of events such as a “reorganization, reclassification,
combination of shares, recapitalization…” implies that there could be other events
which could result in an adjustment. In addition, the phrase “and make certain
other adjustments” after this list seems to indicate that the Company may retain
discretion to make other changes that would impact the value of the CVR. While
Jonathan K. Layne , Esq.
Gibson , Dunn & Crutcher LLP
September 26, 2017
Page 2
we understand that whether the CVR will ultimately result in an ad ditional cash
payment to tendering holders is not known at this time, the method by which the
calculation would be determined should be fully described here. Please revise to
describe, or advise.
Conditions of the Tender Offer
3. Refer to prior comment 20 and your response, including the revised language in
the last bullet point on page 25. While we understand your response to mean that
some triggering events could be knowable before the Expiration Time (such as if
the Company receives notice that counter parties to the capped call or forward
share repurchase transactions will make or will likely make negative adjustments
to the consideration for such transactions), it is not clear how the Company could
know before the expiration of the Offer that the CVRs “have a significant value.”
Clarify the circumstances under which the Company could make this
determination. For example, would this occur only if the Company is in
negotiations for an extraordinary transaction which would trigger a possible CVR
payment? (We would assume this fact would be required disclosure). Please
revise or advise.
4. Refer to comment 21 in our first comment letter and your response. In addition,
refer to our last comment above. Since the value of the CVR would be
determined after the Offer expires, it is not clear to us how this Offer condition
could be triggered /evaluated as of the Expiration Time. Please revise or advise.
Legal Matters; Regulatory Approvals
5. We note your response to comment 23 in our first comment letter. Please be
aware, however, that three to five business days may not be sufficient time
remaining in the Offer, depending on the materiality of the new disclosure you
may disseminate. Please confirm your understanding.
Background and Reasons for Including a CVR in the Offer Consideration
6. Refer to comment 24 in our first comment letter and your response, including the
expanded disclosure in this section. Since the consideration shareholders are
being offered here depends in part on the potential value of the CVR, which in
turn depends on whether a Going Private Transaction occurs within two years of
the Expiration Time, explain why the Company terminated the ongoing
discussions with Party A in Augu st 2017 (including any role that the financial
advisor played in this decision) . In addition, explain why, when Party A indicated
it was still interested in a transaction after receiving notice of termination from the
Company, the Company did not reengage with Party A.
Jonathan K. Layne , Esq.
Gibson , Dunn & Crutcher LLP
September 26, 2017
Page 3
7. We note the new disclosure added to this section in resp onse to comment 24 in
our first comment letter . Expand the descri ption of the significant steps taken by
the Company during its interactions with Party A and the discussions and
negotiations between the parties from November 2016. Some matters that should
be address ed in the expanded disclosure include the following:
When did the Company engage a financial advisor , what was the advisor ’s
role in the negotiations with Party A and otherwise , and what steps did it
take during these discussions ? Did the financial advisor reach any
conclusions wi th respect to Party A ’s interest in a transaction?
When did the Company grant Party A access to a data room and allow due
diligence to be gin?
How long did due diligence proceed before being terminated by the
Company?
Although no specific valuation was provided for the Company’s shares,
what range of values was referenced by the parties and were there
discussions specifically regarding the price per share in a potential
transaction ?
After the parties entered into a nondisclosure agreement on December 23,
2016, what kind of information was share d with Party A?
8. With respect to the second bullet point in comment 24 in our first comment letter,
we asked whether the “various parties” you referenced included either affiliates of
the Company or of its control persons. Your revised disclosure in response
addresses onl y affiliates of the Company itself. Please revise to respond fully to
our original comment.
9. Refer again to comment 24 in our first comment letter and the revised disclosure
in this section explaining how the Board set the two -year term for the CVR. In
the new paragraph where you discuss the reasons for the two -year term, include
the explanation you p rovided in the last paragraph of your response to this
comment (in your response letter). (This disclosure relates to why the Board
decided on a two -year versus a one -year term for the CVR).
Please amend your filing in response to these comments. We may have further
comments upon receipt of your amendment; therefore, please allow adequate time after
the filing of the amendment for further staff review.
Jonathan K. Layne , Esq.
Gibson , Dunn & Crutcher LLP
September 26, 2017
Page 4
Please direct any questions about these comments or your filing to me
at 202 -551-3263.
Sincerely,
/s/ Christina Chalk
Christina Chalk
Senior Special Counsel
Office of Mergers and Acquisitions
cc: James J. Moloney, Esq. (via email)