Soros to Perry Build Herbalife Holdings as Bass Buys Stake

May 16, 2014 10:23 am ET

(Updates with Herbalife shares in last paragraph.)

May 16 (Bloomberg) -- George Soros, Richard Perry and Kyle Bass threw more money behind Herbalife Ltd. in the first quarter even as Bill Ackman pushed to get regulators involved in a probe the marketer of vitamins and weight-loss shakes and the stock slumped.

Soros Fund Management LLC added 1.7 million shares in Herbalife to bring its stake to 4.9 million shares, valued at $281 million at the end of the quarter, according to a regulatory filing yesterday. That made the billionaire’s family office the fifth-largest holder with 5 percent of the company.

Herbalife, which is based in the Cayman Islands and run from Los Angeles, declined 27 percent in the first three months of the year as it disclosed that the U.S. Federal Trade Commission had started a civil probe into its practices and claims that the business is run as a pyramid scheme. The probes were spurred by criticism from Ackman, who has waged a battle to shut the company down since December 2012.

Perry Capital LLC bought 1.8 million Herbalife shares during in the first quarter, raising its stake to 4.8 million shares with a value of $274.9 million as of March 31. Hayman Capital Management LP, run by Bass, bought 318,000 shares with a value of about $18.2 million. Soros had cut his stake in Herbalife in the fourth quarter after the stock had surged.

Ackman’s Pershing Square Capital Management LP made a $1 billion bet against Herbalife in 2012, saying it misleads distributors, misrepresents sales figures and sells a product at inflated prices. Herbalife has repeatedly denied Ackman’s allegations while winning over allies including billionaire Carl Icahn, whose firm controls more than 17.3 percent of the company, and Post Holdings Inc. Chairman William Stiritz.

Rosenstein, Ubben

Barry Rosenstein, the founder of Jana Partners LLC, and Jeff Ubben, the chief executive officer of ValueAct Capital Partners LP, said last month that they don’t believe Herbalife is a pyramid scheme. The executives made the comments in response to a question at the Milken Institute Global Conference in Beverly Hills, California.

Herbalife last month posted higher-than-projected earnings and increased its forecast, offering evidence that the business remains healthy. The company also said it will free up more cash for stock buybacks by suspending its dividend -- a move applauded by its largest shareholder Icahn.

The shares rose 0.2 percent to $61.59 at 10:21 a.m. in New York, and has gained about 7.5 percent since the end of the quarter.

--With assistance from Duane D. Stanford in Atlanta.