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Activist investor Carl Icahn has sold over 50% of his stake in Herbalife back to the company for $600 million. He also gave up the five seats on the board that his representatives filled. After the transaction closes, Icahn Enterprises will own about 8 million shares of Herbalife, which amounts to an approximately 6% stake.
Carl Icahn sells half of Herbalife stake
According to Insider Monkey, Carl Icahn held a 15.5% stake in Herbalife (HLF) as of the end of September. The deal to sell more than half of that stake back to the company is expected to close no later than Jan. 7. Icahn Enterprises is selling the shares for $48.05 each.
The Wall Street Journal reported over the weekend that over the last few days, Carl Icahn sold approximately 10% of his stake back to Herbalife. According to the Journal, Icahn Enterprises' remaining stake amounts to roughly $400 million.
History of Icahn's deal with Herbalife
According to Fox Business, Carl Icahn started purchasing shares of Herbalife in 2012 and became its biggest shareholder in 2013. That same year, the multi-level marketing company and Icahn Enterprises reached an agreement that gave Icahn's firm five seats on Herbalife's board for as long as it owned at least 14 million shares of the company.
Now that the stake is falling back below that threshold, the agreement has been terminated. Herbalife said in a statement on Sunday that Icahn's board representatives have stepped down.
Icahn said in a statement the same day that when he started investing in Herbalife, he believed the company needed an activist, and "that certainly turned out to be correct.
However, he added that "the time for activism has passed" because the company has grown. Icahn also said he doesn't usually invest billions of dollars "where our role as activist is not needed."
Icahn versus Ackman
Carl Icahn stayed with Herbalife through some difficult years. Competing activist investor Bill Ackman took up a short position in the nutritional supplements company, and Icahn opposed him when he went long on the stock. Ackman campaigned against Herbalife, calling it an illegal pyramid scheme.
However, company management has maintained that their multi-level marketing structure is legal. Icahn's activist position on the long side represented a win for Herbalife and set up a very public and bitter showdown. Ackman predicted the company's stock would fall to zero, but he ended up covering his $1 billion position after five years.