Herbalife Ltd. (HLF) Directors Jumping Ship? This news today has the stock jumping…..but should it?
LOS ANGELES, Mar 24, 2014 (BUSINESS WIRE) — Herbalife Ltd. (NYSE:HLF) today announced that it has amended and restated its agreement with Carl C. Icahn, Icahn Enterprises LP (NASDAQ:IEP) and certain related entities (collectively the “Icahn Parties”), which beneficially own, in the aggregate, 17,000,000 shares of Herbalife common stock, representing approximately 16.8% of the company’s outstanding shares. As part of the agreement, Herbalife will nominate three designees of the Icahn Parties, Hunter C. Gary, Jesse A. Lynn and James L. Nelson, for election to Herbalife’s board of directors at its 2014 Annual General Meeting of Shareholders, currently scheduled for April 29, 2014 (“the Annual Meeting”). Messrs. Gary and Lynn are employees of Icahn Enterprises L.P., and will be nominated for election to the Class I directorships currently held by Carole Black and Michael Levitt, whose three-year terms end at the Annual Meeting. Colombe M. Nicholas intends to resign from Herbalife’s board, and Mr. Nelson, who is an independent director of Icahn Enterprises L.P., will be nominated for election to serve the remainder of the term of Ms. Nicholas’ Class II directorship. These three nominations are in addition to the two representatives of the Icahn Parties currently on the board. The size of the board will remain at thirteen directors.
Under the terms of the amended and restated agreement, the Icahn Parties have agreed, among other things, to continue to abide by certain standstill provisions and vote their shares in support of all of the board’s director nominees at the upcoming Annual Meeting. The Icahn Parties continue to have the right to increase the size of their ownership position in Herbalife Ltd. (NYSE:HLF) up to 25% of the outstanding common stock. A copy of the agreement with further detail will be attached to a Current Report on Form 8-K to be filed by Herbalife with the Securities and Exchange Commission.
“This is a very positive agreement and we appreciate the Icahn Parties’ shared confidence in Herbalife Ltd. (NYSE:HLF)’s continued success,” said Michael O. Johnson, chairman and chief executive officer of Herbalife. “The current Icahn representatives have brought considerable insight and experience to our board and we look forward to working with the additional representatives in a similarly collaborative way. I would like to thank Carole Black, Michael Levitt and Colombe Nicholas for their many contributions to the board.”
“We remain resolute in our commitment to the long term success of Herbalife Ltd. (NYSE:HLF),” said Mr. Icahn. “We continue to have confidence in its board and management team, and believe in the company’s great potential. We thank the board for their trust in us and hope and believe our directors will enhance value and contribute to the long term success of the company, as we have done at so many companies over the past decade.”
Now, we know the addition of these Icahn directors was initiated at the behest of Herbalife Ltd. (NYSE:HLF) who reached out to Icahn recently. This could have only been done when current directors Black, Levitt and Nicholas notified the company they were leaving. Now, Herbalife Ltd. (NYSE:HLF) bulls will point out Black and Levitt did not “resign”, their “term ran out”. I think if we are being honest “not running” today is the same as “resigning” as directors being voted back onto Boards are as close to a sure thing as there is in finance today. no, these folks left because they wanted to.
Nicholas just jumped ship early.
When 25% of your board of Directors walks away when you are under investigation from the FTC for being a pyramid scheme and Bill Ackman is pointing out Directors may be held personally liable if it is indeed found guilty……that says something. It also says something that the three have stepped down and said nothing in defense of the company….stone silence. Black is interesting as she and Herbalife Ltd. (NYSE:HLF) CEO Johnson both worked for The Walt Disney Company (NYSE:DIS) at the same time and she is leaving after only 1 term. Levitt, also, one term and done. Nicholas had been there since 2006 before resigning. None have made a public statement in support of the company.
Now, bulls will point out the Icahn folks jumping on board as a positive. All I can say about that is Carl has a near $1B investment at stake, Other than selling the entire thing, nothing he could have done would have been more negative for the stock than if he declined to add more directors to it. It would have been viewed even his folks were leery about the company. He had no choice…
Bulls will also say, “these moves may have been planned for some time”. I’ll call BS on that one. Had Herbalife Ltd. (NYSE:HLF) known these folks were running away ahead of time they would have dealt with the vacancies some time ago rather having to postpone their annual meeting while they scrambled. No, these folks quit suddenly and unexpectedly.
The news here isn’t Herbalife Ltd. (NYSE:HLF) scurried to its largest shareholder for directors, the news is that directors are getting cold feet and leaving…..