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Herbalife to let Icahn add two directors to board

The Los Angeles firm also says the billionaire investor has the right to increase his stake to 25%.

February 28, 2013|By Stuart Pfeifer, Los Angeles Times
  • Carl Icahn will be allowed to choose two new directors on the board of Herbalife.
Carl Icahn will be allowed to choose two new directors on the board of Herbalife. (Jeremy Bales, Bloomberg…)

Herbalife Ltd. said it will add two more directors to its board and allow them to be picked by billionaire activist investor Carl Icahn, who is now one of the nutritional product maker's biggest shareholders.

Icahn has backed Herbalife in its fight against hedge fund manager William Ackman, who accused the Los Angeles company in December of operating a pyramid scheme. The two famed Wall Street investors have been taking swipes at each other for weeks.

Herbalife also announced that Icahn has the right to increase his stake in Herbalife to 25% from the nearly 14% he disclosed last month. Icahn also has said he's interested in potentially taking the company private, and that both sides have held talks.

"We are pleased to have reached this agreement and look forward to working with the Icahn representatives as members of our board of directors," Herbalife Chairman and Chief Executive Michael O. Johnson said in a statement. "We appreciate the Icahn parties' shared views on the inherent value of Herbalife's operations, products and future prospects."

Gaining a pair of seats on the expanded 11-member board could give Icahn more say on whether the company should recapitalize, go private or even begin to find a buyer. It also provides his investment firm with non-public information about Herbalife's operations, which could help Icahn in his public feud with Ackman.

Investors sent shares of the company Thursday up $2.85, or 7.6%, to $40.29.

The stock price has bounced around since December, when Ackman leveled charges against Herbalife and disclosed a $1-billion bet that the shares would collapse. The Securities and Exchange Commission has also launched an investigation into Herbalife's business model.

Herbalife has refuted Ackman's allegations, saying it sells nutritional products through a network of independent distributors.

Icahn said in a statement released by Herbalife that he looked forward to providing additional input into board decisions.

"Over its long history, Herbalife has proven its ability to increase revenues and returns, and we will work with the company to build on its results," Icahn said. "We conducted considerable research on Herbalife and its business before making our investment in the company, and have great respect for its board and management team, and believe in the company's great potential. We expect our shareholder representatives to provide positive input into board decisions affecting the future of the company."

The company last week reported a 12% increase in fourth-quarter profit and raised its 2013 outlook.

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