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Herbalife gives Icahn two seats on board, shares increase

February 28, 2013|By Stuart Pfeifer
  • Herbalife shares rose after a deal was made with billionaire investor Carl Icahn.
Herbalife shares rose after a deal was made with billionaire investor Carl… (Patrick Fallon / Bloomberg )

Herbalife Ltd. announced an agreement with billionaire investor Carl Icahn, who owns more than 13% of Herbalife's stock, that will allow him to add two members to its board and give him the right to increase his holdings to one-quarter of the company’s shares.

Trading in the company’s stock was halted in advance of Thursday’s announcement, then took off after the freeze was lifted. Herbalife shares were up $2.19, or 5.8%, at 37.44 Thursday morning.

“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.”

The agreement amplified a high-profile struggle between Icahn and hedge fund manager Bill Ackman, who accused Los Angeles-based Herbalife in December of operating a fraudulent pyramid scheme and took a $1-billion short against its shares. The two engaged in a spirited debate about Herbalife on live television a few weeks ago.

Herbalife has refuted Ackman’s allegations, saying it sells nutritional products through a network of independent distributors. The company acknowledged that the Securities and Exchange Commission is investigating its business model.

Herbalife is expanding its board from nine members to 11, to make room for Icahn’s nominees. Icahn said in a statement released by Herbalife that he looked forward to providing additional input into board decisions. He had previously indicated he would talk to the company about going private, but did not mention that alternative Thursday.

“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.”

ALSO:

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Carl Icahn buys nearly 13% stake in Herbalife as battle heats up

Herbalife stock tumbles for a 4th day on 'pyramid scheme' claims

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