1 HOUR AGO / 1:23 PM EST / BLOOMBERG Engaged Capital to Consider Bid for Medifast Stocks mentioned: LOGM, MED relates to Engaged Capital to Consider Bid for Medifast Photographer: Kristoffer Tripplaar/SIPA via AP
Photographer: Kristoffer Tripplaar/SIPA via AP
Activist investor Engaged Capital is weighing a bid to take nutritional supplement company Medifast Inc. private, according to people familiar with the matter.
The hedge fund, which owns a roughly 15% stake in Medifast, has been talking to banks and private equity firms to help finance a bid for the company, said the people, asking not to be identified because the matter is private. No final decision has been made and Engaged Capital may opt to not proceed with a bid, they said.
Medifast’s shares rose as much as 10% Thursday. They were up 8.6% to $103 at 1:27 p.m. in New York trading, giving the company a market value of about $1.2 billion.
A representative for Engaged declined to comment. A representative for Medifast, based in Owings Mills, Maryland, didn’t immediately respond to requests for comment.
The takeover would be a first for Newport Beach, California-based Engaged Capital, a hedge fund that typically takes minority stakes in companies and agitates for changes, including by seeking board representation.
The discussions are part of a growing trend of activists teaming up with private equity firms in an effort to boost returns. Elliott Management Corp., for example, partnered with Franscico Partners this week on a deal to take LogMeIn Inc. private for $4.3 billion.
Engaged Capital, run by Glenn Welling, disclosed a stake in Medifast in November, arguing the company was undervalued. The investment firm said it planned to talk with management and the board about ways to maximize value, including a potential sale of all or parts of the company.
Shares in the company have fallen about 25% this year despite an increase in its dividend and pressure from the activist. The shares fell more than 30% in November after it cut its revenue and earnings guidance as costs mounted.
Welling has a long history with Medifast, serving on the company’s board from 2015 to 2018. Engaged Capital saw a 138% total shareholder return on its previous investment in Medifast before it sold its stake in November 2017, according to data compiled by Bloomberg.
Medifast, founded in 1980, manufacturers and distributes weight-loss meals and supplements, according to its website. It also offers coaching.
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