Herbalife is taking a page from Bill Ackman’s book.
Ackman has spent the past year urging Herbalife shareholders to sell their stock, saying the marketer of vitamins and weight-loss shakes is a pyramid scheme. Now Herbalife is approaching investors in Ackman’s hedge fund, suggesting they pull their money from the $12 billion firm, according to three people with knowledge of Herbalife’s strategy. Herbalife’s argument: Ackman’s bet, which has lost as much as $500 million, is risky and irresponsible, said the people, asking not to be named because the campaign is private.
Moelis & Co., an investment bank working for Herbalife, arranged a meeting with Cliffwater LLC, which advises clients on hedge-fund investments, and Herbalife executives, according to two people with knowledge of the gathering. Moelis also reached out to New Jersey’s $76.7 billion pension fund, which has $207 million invested with Ackman, said the people.
“Herbalife and Ackman have been fighting in one theater, and now the warfare has moved into an additional theater,” said John Coffee, professor of securities law at Columbia University. “All’s fair in love and activism,” he said, adding that putting pressure on activist investors through their clients is a new tactic.
