What: Shares of Weight Watchers soared on Monday following the announcement that Oprah Winfrey had purchased a 10% stake in the company. At 11 noon Monday, the stock was up about 89%.
So what: The deal between Winfrey and Weight Watchers goes beyond a simple equity stake. Winfrey will join the Weight Watchers' board of directors as well as the Weight Watchers program, acting as an advisor to the company. "Winfrey will bring insight and strategy to program development and execution that reflects not only her own experiences as a member, but also her unique ability to inspire and connect people to live their best lives," stated Weight Watchers' press release announcing the deal.
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Winfrey will also have the option to purchase an additional 3.5 million shares, or 5% of the company, through an options award. As part of the deal, Winfrey won't be able to sell any of her shares for at least two years, with 15% of the purchased shares able to be sold after three years and an additional 30% available after four years. After five years, Winfrey will be free to exit her position in the company.
Winfrey offered her reasoning for making the deal: "Weight Watchershas 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. I believe in the program so much I decided to invest in the company and partner in its evolution."
Now what: Weight Watchers has been struggling for the past couple of years, with membership to its weight-loss programs in decline. During the second quarter, the company reported that its total subscriber base had fallen by 16.7% year-over-year, with revenue slumping by 22.1% and operating income down 38.4%. The company has faced competition from free mobile apps, and it has struggled to remain relevant.
Tying its brand to that of Winfrey is certainly a game-changing move, and it has the potential to turn around the company's fortunes. During Winfrey's time as host of The Oprah Winfrey Show, her book recommendations often led to millions of copies being sold, an effect that Weight Watchers is certainly hoping carries over to its products and services.
The article Weight Watchers International Inc. Soars as Oprah Bets Big originally appeared on Fool.com.
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