Full Press Release Details
CONFIDENTIAL INFORMATION MEMORANDUM
$1,325,000,000 SENIOR SECURED CREDIT FACILITIES
$150,000,000 REVOLVING CREDIT FACILITY
$1,175,000,000 TERM LOAN B
SPECIAL NOTICE REGARDING PUBLICLY AVAILABLE INFORMATION
COMPANY ) HAS REPRESENTED THAT THE INFORMATION CONTAINED IN THIS CONFIDENTIAL INFORMATION MEMORANDUM IS EITHER (I) PUBLICLY AVAILABLE OR (II) NOT MATERIAL WITH RESPECT TO THE COMPANY OR ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
SECURITIES FOR PURPOSES OF FOREIGN, UNITED STATES FEDERAL AND STATE SECURITIES LAWS. THE RECIPIENT OF THIS CONFIDENTIAL INFORMATION MEMORANDUM HAS STATED THAT IT DOES NOT WISH TO RECEIVE MATERIAL NON-PUBLIC
INFORMATION WITH RESPECT TO THE COMPANY OR ITS SECURITIES AND ACKNOWLEDGES THAT OTHER LENDERS HAVE RECEIVED A CONFIDENTIAL INFORMATION MEMORANDUM THAT CONTAINS ADDITIONAL INFORMATION WITH RESPECT TO THE COMPANY OR ITS SECURITIES THAT MAY BE
MATERIAL. NEITHER THE COMPANY NOR THE ARRANGER NOR ANY OF THEIR RESPECTIVE AFFILIATES TAKE ANY RESPONSIBILITY FOR THE RECIPIENT S DECISION TO LIMIT THE SCOPE OF THE INFORMATION IT HAS OBTAINED IN CONNECTION WITH ITS EVALUATION OF THE COMPANY
1. Administrative information 3
2. Executive summary 17
3. Key credit highlights 27
4. Company overview 37
5. Business model 48 6. Management 56
7. Historical financial results 59
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1. Administrative information
HERBALIFE NUTRITION A. Notice to and undertaking by recipients This Confidential Information Memorandum (this Confidential
Information Memorandum ) has been prepared solely for informational purposes from information supplied by or on behalf of Herbalife Ltd. (the Company ), and is being furnished by Credit Suisse Securities (USA) LLC ( Credit
Suisse or the Arranger ) to you in your capacity as a prospective lender (the Recipient ) in considering the proposed Credit Facilities described in this Confidential Information Memorandum (the Facilities ).
ACCEPTANCE OF THIS CONFIDENTIAL INFORMATION MEMORANDUM CONSTITUTES AN AGREEMENT TO BE BOUND BY THE TERMS OF THIS NOTICE TO AND UNDERTAKING BY RECIPIENTS (THIS NOTICE AND UNDERTAKING ) AND THE SPECIAL NOTICE SET FORTH ON THE COVER PAGE
HEREOF (THE SPECIAL NOTICE ). IF THE RECIPIENT IS NOT WILLING TO ACCEPT THIS CONFIDENTIAL INFORMATION MEMORANDUM AND OTHER EVALUATION MATERIAL (AS DEFINED HEREIN) ON THE TERMS SET FORTH IN THIS NOTICE AND UNDERTAKING AND THE SPECIAL
NOTICE, IT MUST RETURN THIS CONFIDENTIAL INFORMATION MEMORANDUM AND ANY OTHER EVALUATION MATERIAL TO THE ARRANGER IMMEDIATELY WITHOUT MAKING ANY COPIES THEREOF, EXTRACTS THEREFROM OR USE THEREOF. I. Confidentiality As used herein: (a)
Evaluation Material refers to this Confidential Information Memorandum and any other information regarding the Company or the Facilities furnished or communicated to the Recipient by or on behalf of the Company in connection with the
Facilities (whether prepared or communicated by the Arranger, or the Company, their respective advisors or otherwise) and (b) Internal Evaluation Material refers to all memoranda, notes, and other documents and analyses developed by the
Recipient using any of the information specified under the definition of Evaluation Material. The Recipient acknowledges that the Evaluation Material is confidential, sensitive and proprietary information and agrees that it shall keep the Evaluation
Material and Internal Evaluation Material confidential; provided however that (i) it may make any disclosure of such information to which the Company and the Arranger give their prior written consent, (ii) any of such information may be disclosed to
it, its affiliates and their respective partners, directors, officers, employees, agents, advisors and other representatives (collectively, Representatives ) (it being understood that such Representatives shall be informed by it of the
confidential nature of such information and shall be directed by the Recipient to treat such information in accordance with the terms of this Notice and Undertaking and the Special Notice) and (iii) it (and each Representative of the Recipient) may
make any disclosure to any and all persons, without limitation of any kind, of the U.S. federal income tax treatment and U.S. federal income tax structure of the transaction and all materials of any kind (including opinions or other tax analyses)
that are provided to the Recipient (or any Representative of the Recipient) relating to such tax treatment and tax structure. The Recipient agrees to be responsible for any breach of this Notice and Undertaking or the Special Notice that results
from the actions or omissions of its Representatives. The Recipient shall be permitted to disclose the Evaluation Material and Internal Evaluation Material in the event that it is required by law or regulation or requested by any governmental agency
or other regulatory authority (including any self-regulatory organization) or in connection with any legal proceedings. The Recipient agrees that it will notify the Arranger as soon as practical in the event of any such disclosure (other than at the
request of a regulatory authority), unless such notification shall be prohibited by applicable law or legal process. The Recipient shall have no obligation hereunder with respect to any Evaluation Material or Internal Evaluation Material to the
extent that such information (i) is or becomes publicly available other than as a result of a disclosure by the Recipient in violation of confidentiality obligations arising hereunder, (ii) was within Recipient s possession prior to it being
furnished pursuant hereto or (iii) becomes available to the Recipient on a non-confidential basis from a source other than the Company, the Arranger or their respective agents, provided that the source of
such information was not known by the Recipient to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company, the Arranger or any other party with respect to such information.
In the event that the Recipient decides not to participate in the transaction described herein, upon request of the Arranger, the Recipient shall as soon as practicable return all Evaluation Material (other than Internal Evaluation Material) to the
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Arranger and represent in writing to the Arranger that the Recipient has destroyed all copies of the Internal Evaluation Material unless prohibited from doing so by the
Recipient s internal policies and procedures.
Recipient acknowledges and agrees that (i) the Arranger received the Evaluation Material from third party sources (including the Company) and it is provided to the Recipient for informational purposes, (ii) the Arranger and its affiliates bear no
responsibility (and shall not be liable) for the accuracy or completeness (or lack thereof) of the Evaluation Material or any information contained therein, (iii) no representation regarding the Evaluation Material is made by the Arranger or any of
its affiliates, (iv) neither Arranger nor any of its affiliates has made any independent verification as to the accuracy or completeness of the Evaluation Material, and (v) the Arranger and its affiliates shall have no obligation to update or
supplement any Evaluation Material or otherwise provide additional information.
The Evaluation Material has been prepared to assist interested parties in making
their own evaluation of the Company and the Facilities and does not purport to be all-inclusive or to contain all of the information that a prospective participant may consider material or desirable in making its decision to become a lender. The
Recipient should take such steps as it deems necessary to assure that it has the information it considers material or desirable in making its decision to become a lender and should perform its own independent investigation and analysis of the
Facilities or the transactions contemplated thereby and the creditworthiness of the Company. The Recipient represents that it is sophisticated and experienced in extending credit to entities similar to the Company. The information and data contained
herein are not a substitute for the Recipient s independent evaluation and analysis and should not be considered as a recommendation by the Arranger or any of its affiliates that the Recipient enter into any Facility.
The Evaluation Material may include certain forward looking statements and projections provided by the Company. Any such statements and projections reflect various estimates and
assumptions by the Company concerning anticipated results. No representations or warranties are made by the Company, the Arranger or any of its affiliates as to the accuracy of any such statements or projections. Whether or not any such forward
looking statements or projections are in fact achieved will depend upon future events some of which are not within the control of the Company. Accordingly, actual results may vary from the projected results and such variations may be material.
Statements contained herein describing documents and agreements are summaries only and such summaries are qualified in their entirety by reference to such documents and agreements.
It is understood that unless and until a definitive agreement regarding the
Facilities between the parties thereto has been executed, the Recipient will be under no legal obligation of any kind whatsoever with respect to any Facility by virtue of this Notice and Undertaking except for the matters specifically agreed to
herein and in the Special Notice.
The Recipient agrees that money damages would not be a sufficient remedy for breach of this Notice and Undertaking or of the
Special Notice, and that in addition to all other remedies available at law or in equity, the Company and the Arranger shall be entitled to equitable relief, including injunction and specific performance, without proof of actual damages.
This Notice and Undertaking and the Special Notice together embody the entire understanding and agreement between the Recipient and the Arranger with respect to the Evaluation
Material and the Internal Evaluation Material and supersede all prior understandings and agreements relating thereto. The terms and conditions of this Notice and Undertaking and the Special Notice shall apply until such time, if any, that the
Recipient becomes a party to the definitive agreements regarding any Facility, and thereafter the provisions of such definitive agreements relating to confidentiality shall govern. If you do not enter into any Facility, the application of this
Notice and Undertaking and the Special Notice shall terminate with respect to all Evaluation Material and Internal Evaluation Material on the date falling two years after the date of this Confidential Information Memorandum.
This Notice and Undertaking and the Special Notice shall be governed by and construed in accordance with the law of the State of New York, without regard to principles of conflicts
of law (except Section 5-1401 of the New York General Obligations Law to the extent that it mandates that the law of the State of New York govern).
2. Executive summary
2. Executive summary
The summary below highlights information contained elsewhere in this
Memorandum and is qualified in its entirety by the more detailed information and consolidated financial statements and related notes appearing elsewhere in this Memorandum. Herbalife s fiscal year closes on December 31.
Herbalife Ltd. ( Herbalife or the Company ) is a
global nutrition company founded in 1980 that sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products as well as personal care products. The Company sells its products primarily through the
direct-selling channel, which is extremely effective because sales of health, wellness and nutritional products are strengthened by ongoing personal contact, support and education between members and their customers. Key demographic trends related
to health and wellness coupled with the effectiveness of Herbalife s network marketing have led to growing consumer awareness and increasing demand for the Company s products.
As of September 30, 2016, the Company sold its products in 94 countries through a network of 4.1 million independent members ( Members ). LTM 9/30/16 net sales and
adjusted EBITDA were $4,542 million and $861 million (19% margin), respectively.
Herbalife s science-based products have helped consumers from around the
world lose weight and improve their health. As of December 31, 2015, the Company marketed and sold over 140 products encompassing over 5,000 SKUs globally. Its products are sold as part of a portfolio program, which is comprised of a series of
related products designed to simplify weight management and nutrition for consumers. The Company s bestselling product, Formula 1 Healthy Meal (meal replacement shake) has been approximately 30% of net sales. Herbalife segments its product
portfolio into four groups:
Energy, sports and fitness
Outer nutrition and other
B. Transaction overview
Herbalife intends to raise $1,325 million of new credit facilities to
refinance its existing revolver, raise capital for general corporate purposes and pay related fees and expenses. The Company s new credit facilities will include a $150 million revolving credit facility (the Revolver ) and a $1,175
million Term Loan B (the TLB ) (the Revolver together with the TLB, the Credit Facilities ). Pro forma for the financing, secured leverage and total leverage will be 1.4x and 2.7x, respectively, based on LTM 9/30/16 Adj. EBITDA
of $861 million. The proceeds will be used to repay ~$410mm of existing debt as well as cash on balance sheet for general corporate purposes, including but not limited to potential growth investments and share repurchases within eighteen months of
Summary of the credit facilities
Revolving Credit Facility
$150 million (undrawn)
Upfront fee / issue price:
125-75 bps tier-based
Note: Adjusted EBITDA calculated based on existing credit agreement.
HERBALIFE NUTRITION Sources and uses ($ in millions) Sources Amount New $150m revolver New term loan B 1,175 Total sources $1,175
Uses Amount Repay existing $425m revolver $410 General corporate purposes 737 Estimated fees and expenses 28 Total uses $1,175 Pro forma capitalization ($ in millions) As of 9/30/16 Actual Adj. Pro forma Capitalization: Cash and cash equivalents
$788 $737 $1,525 Existing $425m revolver $410 ($410) New $150m revolver New term loan B 1,175 1,175 Total secured debt $410 $1,175 Existing convertible notes(1) $1,150 $1,150 Other debt 19 19 Total
debt $1,579 $2,344 Market value of equity(2) 5,101 5,101 Total capitalization $6,680 $7,445 LTM operating statistics: Adj. EBITDA $861 $861 Net cash interest expense 42 36 78 Capital expenditures 133 133 Credit statistics:
Secured debt / Adj. EBITDA 0.5x 1.4x Total debt / Adj. EBITDA 1.8x 2.7x Net total debt / Adj. EBITDA 0.9x 1.0x Adj. EBITDA / Net cash interest expense 20.3x 11.0x (Adj. EBITDA - capex) / Net cash interest expense 17.1x 9.3x Market value of equity /
Total capitalization 76.4% 68.5% Note: Adjusted EBITDA calculated based on existing credit agreement. (1) Due 2019, assumes maturity extension. (2) Market capitalization based on share price of $53.30 as of January 18, 2017. CREDIT SUISSE
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Herbalife is a global nutrition company founded in 1980 that develops,