Oprah Winfrey will buy 10% of Weight Watchers International and join its board, giving the struggling provider of weight-loss programs a jolt of star power as it works to fend off cheaper digital rivals.
The shares surged 72% to $11.66 at 8:28 a.m. in early trading after the company announced the investment, which will come in the form of newly-issued stock and include an option to buy an additional 5%. As part of the deal, Ms. Winfrey also has signed up with a Weight Watchers program and will share her experiences along the way.
Weight Watchers could use a boost. The company has suffered from falling sales and profit as consumers migrate to free, digital methods for counting calories and keeping in shape. With the new partnership, Weight Watchers is broadening its mission to helping people live a "healthier, happier life" instead of just helping them lose weight, Chief Executive Officer Jim Chambers said in the statement.
"I believe in the program so much I decided to invest in the company and partner in its evolution," said Ms. Winfrey, who'll also serve as an adviser to the company, helping with program development and execution.
Weight Watchers, about 51% of which is owned by Luxembourg-based Artal Group SA, had fallen 73% this year through last week.
Beyond the financial boost, Weight Watchers stands to get a major publicity boost with its marketing ties to Ms. Winfrey. JP Morgan analyst John Faucher called the partnership "a defining moment for the company," as Weight Watchers can benefit from using Ms. Winfrey's name and endorsements for the program. He argues in a research note that Weight Watchers "has not been able to secure an effective spokesperson ever since it hit a homerun with Jennifer Hudson back in late 2010 (she parted ways with the company in 2014). We believe that partnering with Oprah is a very powerful proposition, given her following and the fact that she will publicly share her experiences."
Weight Watchers has been working to update its image with new advertising and a redesigned magazine, which debuted in January. But the effort has yet to pay off. Sales fell more than 20% in each of the first two quarters of the company's current fiscal year as it loses members to free options like MyFitnessPal.
--Bloomberg with additional reporting by Jessica Wohl