Going Long: Icahn Wins 3 More Seats on Herbalife Board
Herbalife Ltd. (NYSE:HLF), a nutrition and weight loss products company, has forged a new agreement with Icahn, allowing the billionaire activist investor to name three new directors to the board, according to a Reuters report on Monday. The announcement sent the company’s shares soaring by as much as 7 percent, despite a recent federal probe into the company’s practices.
Herbalife has announced it will nominate two of Icahn’s employees Hunter C. Gary, Jesse A. Lynn, while the third nominee, James L. Nelson, is currently serving as an independent director of the firm Icahn Enterprises. The nominees will be put up for election during Herbalife’s annual general meeting, scheduled for April 29.
Currently, Icahn and his related companies hold about 16.8 percent in Herbalife’s stock, and if Icahn’s nominees are approved, the activist investor will control five out of the company’s thirteen board members. As part of the revised agreement, Icahn is subject to “standstill provisions,” which prevent the billionaire investor from accumulating enough stock to take over the company, though he is still allowed to raise his stake in Herbalife up to as much as 25 percent.
Icahn also agreed that he would vote in favor of all the new nominees to the board, even those which he didn’t pick himself. ”We remain resolute in our commitment to the long term success of Herbalife,” Icahn said in a statement Monday, per Bloomberg.
“This is a very positive agreement and we appreciate the Icahn parties’ shared confidence in Herbalife’s continued success,” said Michael O. Johnson, Herbalife’s chair and chief executive officer in a statement.
The federal probe into Herbalife was in part executed at the urging of rival activist investor, Bill Ackerman, who has called Herbalife a “pyramid scheme,” which he claims, “misleads distributors, misrepresents sales figures, and sells a commodity product at inflated prices,” according to a Bloomberg report.
Ackerman made a $1 billion bet against Herbalife in 2012, and has been doggedly trying to shut the company down ever since. Herbalife sells skin creams and weight loss products in over 90 countries through a network of distributors. Investors in Ackerman’s hedge fund, Pershing Square Capital Management, could stand to make as much as $2 billion from an Herbalife shut down, Bloomberg added.