Nutrition products company Herbalife Ltd. (HLF), Thursday agreed to accept two Board nominees of activist investor Carl Icahn, and said it will expand the Board strength by two members.
Shares of Herbalife, which has seen strong gains of late, climbed about 6.7 percent in afternoon trade on the New York Stock Exchange.
As per the terms with Icahn, who along with his affiliates own 13.6 percent stake in Herbalife, the nutrition company will enhance its Board size to 11 members immediately before the 2013 annual meeting of shareholders.
Icahn agreed to, among other things, abide by certain standstill provisions and vote in support of all of the Board's nominees. Icahn and his affiliates also have the right to increase the size of their stake in Herbalife up to 25 percent of the outstanding common stock.
"We are pleased to have reached this agreement and look forward to working with the Icahn representatives as members of our Board of Directors," said Herbalife CEO Michael Johnson.
Herbalife recently grabbed the attention of Wall Street after Icahn disclosed impressive stake buildup in the company, indicating that he desires the company seek strategic alternatives, including the option of taking it private.
Nevertheless, critics of Herbalife, such as Bill Ackman, dub the company as a "pyramid scheme", with doubts over its business model. Ackman had charged Herbalife of using inflated pricing and misleading sales data. Other detractors of Herbalife include David Einhorn of Greenlight Capital.
Icahn said his view of Herbalife is vastly different, opining that the company has a legitimate business model with long-term potential for growth.
A network marketing company, Herbalife sells weight management, nutritional supplement, fitness, and personal care products. The company recently reported a better-than-expected rise in quarterly profit, on growth in volumes. Herbalife also raised its guidance for fiscal year 2013.
Herbalife is trading at $39.93, up 6.65%, on a volume of 6.4 million shares.
by RTT Staff Writer
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