Carl Icahn’s Herbalife Conundrum: Trump

Billionaire financier Carl Icahn received approval from the U.S. Federal Trade Commission to acquire up to a 50 percent stake in the sports nutrition company Herbalife (HLF) in October 2016, following a $200 million settlement with the FTC earlier that same year, the FOX Business network has learned.

This may pose a fresh challenge for the brash billionaire. As a special advisor to President Trump on regulatory reform, it poses clear conflict of interest issues if Icahn decides to acquire a bigger stake in Herbalife.

“Once he takes 50 percent, he is a controlling shareholder and the company becomes his affiliate. If he takes any action to benefit his affiliate, it is the same as if he was benefitting himself. But he cannot take action; he can only give advice. The danger would be if he tried to pressure any federal agency with arguable jurisdiction over Herbalife,” said John Coffee, professor of law and director of the Center on Corporate Governance at Columbia Law School in New York, during an interview with FOX Business.

It is still unclear, when, if ever, Icahn will make a move to up his stake in the company. He currently has a 24 percent stake, more than 22 million shares and five seats on the board. His last round of Herbalife share shopping cost him $100 million in November where he purchased 1,832,402 shares at $54.70 per share. Since, Icahn has not increased his stake. A July press release, that announced the FTC settlement, also revealed Herbalife had agreed to allow Icahn to own a 34.99% stake in the company.

If Icahn were to increase his stake substantially, the U.S. antitrust law requires that he notify the FTC.

At an investor conference in September, Icahn announced he would be asking permission from his company, Icahn Associates Corporation, for “accelerated treatment for the right to go up to 50 percent (in HLF outstanding shares)”. He disclosed this during an interview at a rival news network’s investment conference.

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