Hedge Fund Taking Weight Watchers Private

Steve Kanaval |

Weight_Watchers.jpg

Shares of Weight Watchers International, Inc. ($WTW) are up 17% in early trading on news that Artel Group, a large Luxembourg based hedge fund is looking to make a deal for all outstanding shares and take the company private. These are unconfirmed as yet, but let’s look at the facts of the case:

Today, after the 18% rally, the company value was worth $275 million. On January first of this year, the stock had a value of $1.3 billion, meaning it has lost 80% of its value to date in 2015, and since the death of its founder in April. But this is more of a story about a change in the way millennials lose weight with gadgets – the days of Weight Watchers and Jenny Craig have been taken out to pasture.

Logically, if you are Artel (which owns 52%) you are best salvaging the company and taking it private quietly - buying shares as they decline. But the news is out, so now need to pay more. I really don’t see this as good news for the majority stakeholders.



Taking it private is smart, because the costs of remaining public, along with the reporting responsibilities by management, weigh heavy on this $4 stock. It was different  in 2011, when shares were trading $85 per share and being public was a useful vehicle to pay the founder and management, but today you really just have the brand and declining cash flow. Just another casualty of disruptive technology. 

Weight Watchers and Jenny Craig are victims of Apple ($AAPL),

Fitbit Inc. ($FIT) and your smart phone have done a great deal of damage to these public companies that were cash cows at one point and widely held. However, the change in the way we exercise weighs more than the claim that it was a poor job by management running the company itself. Weight Watchers began in 1963, when founder Jean Nidetch invited friends into her home in New York City's Queens Borough once a week to talk about the best ways to shed excess pounds. Starting from that first group of friends, the company had grown to help millions of women and men worldwide who have joined Weight Watchers to lose weight and lead healthier lives.

I fully expect this company to be private in 2015, and you will be shedding excess dollars if you are an uninformed common shareholder, because they could buy all shares at $4.50 and disappear forever. The brand will still have value and reappear in other ways, but as a lowly common shareholder, you don’t benefit much from owning shares at these levels…so wave goodbye to Weight Watchers as they fade into the sunset.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 173.30 1.60 0.93 3,241,347 Trade
FIT Fitbit Inc. Class A 7.06 0.07 1.00 286,285 Trade
WTW Weight Watchers International Inc 45.87 -0.08 -0.17 29,409 Trade

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