Carl Icahn, Herbalife’s biggest shareholder, will not add to his stake in the company as part of a possible move to add more of his representatives to its board, The Post has learned.
The billionaire investor was approached by Herbalife after it learned it was the subject of a regulatory probe and asked him to add more of his people to the board, according to sources.
While Herbalife said in a regulatory filing that talks between it and Icahn over an added board seat were ongoing, it was not known that the Los Angeles company had approached Icahn about the issue soon after it learned of the Federal Trade Commission probe.
While Icahn, who has a 17 percent stake in the distributor of weight-loss shakes, has not made up his mind yet on whether he will name an added board member, he has determined he will not buy more Herbalife shares as part of that deal, sources said.
The FTC probe could last for a year or more, sources said.
“There is no question there are rough roads ahead,” said one investor.
It is not known if the Herbalife-Icahn talks are about a seat on an expanded board or about replacing a board member or members who are stepping down.
Shares of the embattled multi-level marketer have fallen more than 23 percent since news of the FTC probe broke last week — although Icahn is sitting on a paper profit of roughly $250 million.
Herbalilfe closed Thursday at $50.79, down 3.7 percent.
Both Icahn and Herbalife declined to comment.
During the past year, Icahn became Herbalife’s chief defender while ridiculing his arch-nemesis,
Pershing Square hedge fund founder Bill Ackman, whose $1 billion bet that the company is a fraud gained momentum with the FTC probe.
The same day Herbalife heard from the FTC, coincidentally, Ackman said he had written letters to board members warning them they could have “enormous personal liability” if it is proven the company is a pyramid scheme.
“As directors of a fraudulent public company, you will be held liable, at a minimum, for monetary damages unless you have met the high standards that apply to a director’s performance,”
Ackman wrote in an Oct. 24, 2013, letter, a copy of which The Post has obtained.
In a second subsequent letter to board members, also seen by The Post, Ackman warned that approving a share buyback that depleted the company’s capital — and thus its ability to pay off victims — could also be in violation of law in the Caymans, where Herbalife is incorporated.
In 2011, independent directors of Cayman-based hedge fund Weavering Macro Fixed Income Fund paid damages of $110 million each when the fund collapsed, Ackman said in the letter.
A court, on behalf of the victims, “could require you to make the company whole out of your own pockets for the cash wrongly used in share repurchases,” Ackman claimed.
One source close to the board said Ackman’s letters were discussed in board meetings last year but were dismissed as “scare” tactics.
Herbalife undertook a $1 billion leveraged share repurchase in February.