This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Carl Icahn's Not So Hostile Herbalife Board Seat

NEW YORK ( TheStreet) - In recent years, activist investor Carl Icahn has fought for board seats at the likes of Chesapeake Energy (CHK), Navistar (NAV), Clorox (CLX) and Oshkosk (OSK) with varying degrees of success.

Embattled supplements seller Herbalife (HLF - Get Report), under short-selling pressure and stinging criticism from hedge funder William Ackman of Pershing Square Capital Management, welcomed Icahn with open arms.

On Thursday, Herbalife announced it is expanding the company's board of directors by two members to facilitate seats representing Icahn and his investing conglomerate Icahn Enterprises (IEP - Get Report).

That disclosure and the ability for Icahn to boost his stake in the company to 25% of its outstanding shares, indicates that the legendary activist is ready to dial up his investment in Herbalife and the pressure against arch-rival Ackman.

While Icahn's ascension to Herbalife's board and a 'standstill' agreement with the billionaire investor to acquire a maximum of 25% of the company's shares are expressed in similar language as a successful activist campaign, Thursday's move appears to be more about Herbalife's defense against Ackman.

"The Icahn Parties have agreed to, among other things, abide by certain standstill provisions and vote their shares in support of all of the Board's director nominees," reads a statement announcing Herbalife's board expansion and Icahn's right to increase his stake to 25%.

Michael O. Johnson, chairman and chief executive officer of Herbalife added he looks forward to working with Icahn and his associates.

"We appreciate the Icahn Parties' shared views on the inherent value of Herbalife's operations, products and future prospects," he said in the statement.

A statement from Icahn said he had "conducted considerable research on Herbalife and its business," adding, "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."

"This is not one where we don't like management. We do like management," Icahn said in a Bloomberg Television interview.

Herbalife shares gained over 7.61% to $40.29 in Thursday trading, putting shares up over 22% for 2013.

Earlier in February, Icahn disclosed a 13.6% stake in Herbalife, contesting Ackman's vocal campaign against the company and his characterization of the multi-level marketing company as a pyramid scheme. In the background of Icahn's trade is a long running dispute between the two billionaire hedge funders over a real estate deal gone sour.

Now with a billion dollars on the line for Ackman in his trade against Herbalife, and the prospect of a similar wager by Icahn, the stakes have increased.

To be seen is whether Icahn presses for any of the change that normally accompanies a successful activist campaign.

"Ackman has given us the opportunity to buy a company at a discounted price," Icahn added in the Bloomberg interview.

Since gaining seats to Chesapeake Energy's board in 2012, Icahn's influence has helped to spur asset sales, a change of the company's board structure and the departure of the company's founder Aubrey McClendon.

For Ackman, Herbalife's late-afternoon disclosure added to what was already a rough day.

Pershing Square's largest holding, J.C. Penney (JCP), reported a near 30% deterioration in its sales for the fourth quarter, pushing the struggling retailer's shares nearly 17% lower in Thursday trading.

The earning miss raises serious questions about whether the company's turnaround plan, as mapped out by CEO Ron Johnson, will succeed.

-- Written by Antoine Gara in New York

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
HLF $57.95 0.00%
IEP $60.87 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs