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Herbalife in advanced talks to settle FTC probe, shares jump

An Herbalife logo is shown on a poster at a clinic in the Mission District in San Francisco, California April 29, 2013. REUTERS/Robert Galbraith

By Subrat Patnaik

(Reuters) - Herbalife Ltd said it was in advanced talks with the U.S. Federal Trade Commission to resolve a probe into its business practices and the health supplements maker reported its first sales rise in six quarters.

Shares of Herbalife, which estimated a payment of $200 million to settle the investigation, surged 14.5 percent in extended trading on Thursday. (http://bit.ly/1TLHfvr)

"While there are a number of open issues, those discussions have progressed to an advanced stage and the range of outcomes now includes litigation or settlement," the company said in a statement.

An FTC spokesman told Reuters that there could be injunctive relief that could be "just as significant as the money obtained for consumers and even more influential on a company's future operations."

Herbalife has been under heavy scrutiny for its business practices, with billionaire activist investor Bill Ackman even calling the company a "pyramid scheme" that pays members more for recruiting new members than for selling its products.

Ackman, who holds a large short position in Herbalife's stock, got more ammunition when the company said in March that a database error had caused it to overstate new member growth over the second, third and fourth quarters.

Herbalife did not provide any update on the growth numbers on Thursday.


SALES RECOVER

Demand for Herbalife's products recovered in North America, its biggest market, in the first quarter, with sales rising 8.5 percent.

Sales in China, which has been the only bright spot for the company in the past few quarters, increased by nearly a third.

Herbalife also raised its adjusted profit forecast for 2016 to $5.10-$5.45 per share from $4.85-$5.30.

Its net income rose 22.5 percent to $95.8 million, or $1.12 per share, in the quarter ended March 31.

Excluding items, the company earned $1.36 per share, beating the average analyst estimate of $1.09, according to Thomson Reuters I/B/E/S.

Net sales increased 1.3 percent to $1.12 billion, topping the average estimate of $1.07 billion.

Herbalife shares were trading at $66.75 after the bell.


(Reporting by Subrat Patnaik in Bengaluru and Diane Bartz in Washington; Editing by Kirti Pandey)