Weight Watchers International, Inc. (NYSE: WTW)
Weight Watchers is having an incredible time in the market at the moment. Over the past two trading sessions, we’ve seen astronomical gains in the stock after the company signed an agreement with Oprah Winfrey. Today, we’ll talk about the details of the agreement, why it’s so important for WTW, how the market is reacting to the news and what we can expect to see from Weight Watchers moving forward.
The Oprah Winfrey & Weight Watchers Partnership
Yesterday, it was announced that Oprah Winfrey and Weight Watchers joined in a partnership designed to inspire people around the world to lead healthier and more fulfilling lifestyles. Under the new partnership, Oprah Winfrey will be making a rather large investment in WTW, joining the board of directors, and bringing her insights into the creation of future products and services offered by the company. In a statement, Winfrey had the following to offer…
“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… I believe in the program so much I decided to invest in the company and partner in its evolution.”
Details Of The Agreement Between Oprah And WTW
According to recent filings, the agreement between Oprah Winfrey and Weight Watchers is actually two agreements: a Strategic Collaboration Agreement and a Share Purchase Agreement. Here are the details of both…
Strategic Collaboration Agreement
Under the Strategic Collaboration Agreement, Oprah granted WTW to the right to use, subject to her approval, her name. This includes the variations Oprah and Oprah Winfrey. She also granted the company the right to use her image, likeness and endorsement for and in connection with the company, its programs, products and services. In return Weight Watchers has granted Oprah the right to use Weight Watchers marks to collaborate with and promote the company, its programs, its products, and its services. According to the filing, the initial term of this agreement is five years and includes additional successive one year renewal terms. Over the term of this agreement, Oprah will consult with Weight Watchers and participate in the development, planning, and execution of new plans.
Share Purchase Agreement
Under the Share Purchase Agreement, Oprah agrees to purchase an aggregate of 6,362,103 shares in the company at $6.79 per share. This comes out to a total of investment of $43,198,679.97 in WTW. Upon the closing of this agreement, Oprah will own about 10% of Weight Watchers. According to the filing, the purchased shares will not be transferred until after a two year period, subject to limitations. The agreement states that Oprah will have the ability to transfer up to 15% of the shares to herself prior to the third anniversary of the contract. Prior to the fourth anniversary, she will be able to transfer up to 30% of the shares and prior to the fifth anniversary, she will have the ability to transfer up to 60% of the purchased shares.
Why Oprah Winfrey Is So Important To Weight Watchers
Oprah is a household name. Many people who don’t even know what she looks like will know her name. More importantly, she was a customer of Weight Watchers. She understands the program and her following knows that. With the massive following Winfrey has, anything she attaches her name to grows exponentially. Also, Oprah goes far beyond her name. The reality is that she wasn’t just given the position as most influential woman in the world; Oprah earned that. Throughout the years, she has created a brand that few can compete with. Her guidance in WTW will likely prove to be incredibly valuable!
How The Market Is Reacting To The News
As investors have come to expect any time there’s good news surrounding a publicly traded company, WTW is climbing dramatically in the market. Yesterday, the stock posted high double digit gains and it seems to be working to do the same again today. Currently (11:55), WTW is trading at $17.81 per share after a gain of 27.95%.
What We Can Expect To See Moving Forward
Moving forward, I’m expecting to see more overwhelmingly positive news out of Weight Watchers. The relationship between WTW and Oprah is likely to lead to incredible innovation in the plan to inspire people to live more healthy and fulfilling lives which will lead to higher sales volume and higher profits. In a nutshell, I’m expecting to see massive long term gains out of this stock. However, it is important to remember that price movements in the market generally happen through a series of overreactions. Therefore, I wouldn’t be surprised to see declines tomorrow that bring the stock down to a more sustainable rate before growth continues.
What Do You Think?
Where do you think WTW is headed and why? Let us know in the comments below!
[Image Courtesy of Salon]