OpTree

We have been covering the whole USANA saga to go private and Wentz and co. offering first $26 to take the company private and then upping their offer to $28 before getting completely rejected...twice.

Well what is most interesting is how Wall Street has reacted to the news to abandon talks to go private and the settlement with Barry Minkow. In literally a week, USANA’s stock (NASDAQ: USNA) has seen a huge jump from $28 (Wentz and co. last bid) to a close of $38.15 today - a 38% increase!

For those that may or may not follow MLM public companies, it is very rare to see such growth in a short period of time. No question that all of the news the company has been able to put behind them has helped but another theory comes to mind and that is Wentz had absolutely nothing to lose if his bid was rejected and everything to gain.

For one, USANA got a lot of free publicity out of the talks which gave them greater exposure to trading desks around the country and world. The other key component as we had pointed out since Wentz is the largest shareholder, the rejection by the independent counsel which was hired to review the offer (and later rejected as being far too low) only showed that Went’z stock was undervalued to begin with and people should start buying it up. GENIUS!

So where does that leave Wentz and Gull Holdings today? Combined they own over 16m shares which means they have made (on paper) roughly $160 Million in a week! Not a bad return for making a low-ball offer on your own company huh?

Whether this was planned from the start or is a product of the outcome, I give a lot of credit to Wentz and Gull for the results. It was a brilliant plan that was executed almost flawlessly with incredible results. Oh, and it doesn’t hurt that Minkow is now out of the picture as well.

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The second quarter results should be starting to file in during the next couple weeks, and the first major company to release results is USANA. The numbers were mixed, but overall not terrible given the somewhat public legal battle over taking the company public.

Net sales for the second quarter of 2008 increased by 1.5% to $109.2 million, compared with $107.5 million in the second quarter of the prior year. USANA attributes the increase in net sales to a new incentive program for distributors along with strong foreign currencies. Earnings per share saw a slight decrease from second quarter of 07 falling from $0.66 per share to $0.62 per share, a 6% percent decrease. USANA says that the slight decline comes from a slight rise in operating costs.

North America saw a 3.3% percent decrease in sales to $65.9 million, however net sales in the Asia Pacific Region increased by 9.9% percent to $43.3 million.

“We were pleased to see our second quarter financial results come in above our original expectations,” said Dave Wentz, president of USANA Health Sciences. “Achieving sequential quarterly sales gains in all but two of our 13 markets gives me confidence that our business is starting to regain its upward momentum. We will continue to focus on accelerating our top-line growth.”

USNA’s stock (NASDAQ: USNA) didn’t react too well to the news sending the stock down a bit to close at $27.10.

USANA predicts that for the full year 2008, net sales will be somewhere around $435-$445 million dollars and earning per share, on a fully diluted basis will be between $2.30 and $2.36.

In a bit of more surprising news from the company, Dave Wentz (son of Dr. Myron Wentz) will takeover as CEO after his stint as President. Dr. Wentz will remain on as Chairman. No question the debacle of trying to take the company private has had its effects on the senior Wentz over the past few weeks. A concern we have is now Dave is the CEO of USANA and the Chairman of the DSA as we reported last month.

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In the latest news in the ongoing battle to take USANA private; a judge has scheduled a hearing next week to hear arguments about whether or not the proposed buyout of the nutrition company should be halted to protect the interests of the company’s minority shareholders.

The hearing is set for Monday the 14th which is the same day that the newest $28 dollar per share offer proposed by the majority owners a few days ago, is set to expire. The majority shareholders, let by USANA founder Myron Wentz, controls 68% of the shares.

Several minority shareholders have filed suit against the company claiming that the offer is too low and that the Wentz group are withholding information about the current and future value of the company. One minority shareholder, Max Siberman of Ohio, has won a motion to expedite the process of interviewing those involved in the bid proposal and discovering of evidence.

So, it will be another week before we hear anything, but we will keep you posted on any updates.

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Gull Holdings, founded and led by Myron Wentz, the Founder and CEO of USANA has raised their bid to take USANA private. The new bid is a two dollar increase over the previous bid, taking it to $28 dollars per share (which we still don’t think is nearly enough). The original bid of $26 dollars per share was unanimously rejected by both the minority shareholders, and a special committee appointed by the board to review the bid.

In the last week, USANA has been faced with not one, but two lawsuits by minority shareholders who feel that Gull Holdings along with Wentz and other majority shareholders, are trying to low ball the minority shareholders and are underestimating the future value of the company. Both lawsuits are now in court seeking approval to become class action suits.

The Wentz family, along with other majority shareholders control 68% percent of the company. After the initial bid was rejected, Wentz stood firm saying that they would not increase the bid. However, with increasing pressure from the special board committee and the remaining shareholders, “Wentz has given in”.

Because one of the original goals in taking the company private was to eliminate frivolous lawsuits, it is a smart move on Gull’s part to increase the bid before the two pending lawsuits became worse. Gull has said that this is the highest price permitted to meet its debt financing commitment but we firmly believe it wont be nearly enough. In January of this year, the stock was trading at $43 per share so to think the shareholders will take such a discount seems impractical. Hopefully the two sides can reconvene and come to an agreement soon.

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