Oprah Winfrey will buy a 10 percent stake in Weight Watchers International Inc, adding her celebrity and consumer appeal to a diet brand that has been shedding subscribers.
Winfrey's $43.2 million investment doubled Weight Watchers' sagging share price, with more than 57 million shares changing hands on U.S. exchanges, the busiest trading day in the company's history.
Weight Watchers has suffered from a shift in what U.S. consumers consider to be healthy, with shoppers increasingly moving toward natural foods and away from diet products. Winfrey's frankness about her personal struggles with weight loss may help revive the brand, but analysts said her influence with young people was uncertain.
The former talk-show queen will join Weight Watchers' board and work to broaden the company's reach by participating in its weight-loss program. She will document her experience and appear in Weight Watchers marketing, following previous endorsements by singers Jennifer Hudson and Jessica Simpson.
"Weight Watchers has given me the tools to begin to make the lasting shift that I and so many of us who are struggling with weight have longed for," Winfrey said.
Winfrey, 61, was regarded as America's most influential celebrity for years thanks to her daily talk show, magazine, book club and production company Harpo.
Her influence has slipped since she ended 'The Oprah Winfrey Show' in 2011 after 25 years to launch the Oprah Winfrey Network (OWN) on cable TV. However, she remains one of the richest and most powerful celebrities in the United States. Forbes magazine has estimated her net worth at $3 billion.
"The good thing about picking Oprah Winfrey is that although she is very much a really strong media personality, lots of people still see her as being a very ordinary person, a person that has struggled with things like weight loss," said Neil Saunders, managing director of retail research firm Conlumino.
The media star will receive options to buy another 5 percent of Weight Watchers.
The company is trying to woo back clients who formerly focused on counting calories but are now more interested in pursuing "health and wellness," a trend that can encompass everything from consuming more natural ingredients to foods that are high in protein. The switch has pressured sales of products ranging from low-calorie frozen dinners to diet soda.
Winfrey's endorsement will likely resonate with female consumers over the age of 50, Morningstar analyst R.J. Hottovy said in a research note. However, it is unclear how Weight Watchers will bolster its brand positioning with a younger audience, he said.
"Her influence is not as strong with the younger generation," said Efraim Levy, S&P Capital IQ analyst, adding that the older generation knew her when she was most popular.
STOCK SOARS
Weight Watchers was founded in 1961 and in 1997 introduced its 'points' food system, a formula that dieters use to determine the value of a food portion based on its calories, fat, and fiber content.
Consumers' recent embrace of calorie-counting apps on mobile phones, and the popularity of wearable fitness trackers such as those made by Fitbit Inc <FIT.N>, have made it hard for Weight Watchers to stand out, analysts have said.
Last year, the company launched an enhanced version of its online subscription with a new around-the-clock expert chat for users. Still, active online subscribers have dwindled to 2.8 million from a four-year high of 3.6 million in March last year.
"The severity of recent recruitment struggles implies more fundamental issues at hand, namely a platform lacking innovation, technology, and personalization," Morningstar analysts said in an Aug. 10 note.
Winfrey will buy nearly 6.4 million shares at Friday's closing price of $6.79 per share.
If Winfrey buys 15 percent of Weight Watchers, she will become the second-largest shareholder, after investment firm Invus Public Equities Advisors LLC, which owned a 51.5 percent stake as of June 30.
Weight Watchers stock doubled, last up by $7.86 to $14.69 on the New York Stock Exchange.
Coming into Monday's trading, the stock had lost 92 percent of its value since a closing peak of $85.76 in May 2011, and for several years attracted a steady flow of short sellers, betting the stock would fall further.
Weight Watchers currently has short interest of about 11.65 percent of shares outstanding, according to Markit, a relatively high amount. That means investors who were betting against the shares might today be in a position where they are forced to buy back the stock.
(Reporting by Yashaswini Swamynathan in Bengaluru; Additional reporting by Sruthi Ramakrishnan, David Gaffen, and Jill Serjeant; Writing by Nick Zieminski and Tom Polansek; Editing by Maju Samuel, Sayantani Ghosh and Bill Rigby)
