Are We About To See A Major Transformation At Herbalife?

Herbalife Ltd. HLF shares traded up about 4 percent during Thursday's after-hours session.

The reason? Headlines suggesting the company's management is working on a plan to refinance.

According to Bloomberg, Herbalife is in talks for a $1.2 billion term loan and a $1.175 billion refi. Bloomberg said Herbalife will hold a bank meeting on Friday, January 20, to discuss details of a deal.

Considering the post-market action in the stock, it appears investors are liking the news... but why? What could Herbalife do with such a refinancing effort?

While these are only speculation, here are a couple of ideas.

A Transformative Acquisition

Herbalife's struggle with gaining wide-spread retail distribution is nothing new to investors. Buying a major player in the nutritional retail space could get its products in front of more users and potential users.

A Large-Scale Buyback

Given Herbalife's current market cap of just under $5 billion, management could use a buyback of its own shares to effectively reduce its share count by more than 20 percent.

The stock traded recently at $53.55, up less than a percent in post-market action. Shares are up about 10 percent in the brief year-to-date period.