Carl Icahn in studio FBN

(Reuters)

Icahn Mulled Selling Herbalife Stake to Group That Included Bill Ackman

Industries Dow Jones Newswires

Carl Icahn has recently discussed selling his stake in Herbalife to a group including the company's arch-nemesis William Ackman, another surprising twist in a battle between billionaires that has riveted Wall Street for years. 

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Investment bank Jefferies Group has been seeking over the past month to find buyers for Mr. Icahn's 18% stake, which is worth roughly $1 billion, people familiar with the matter said. The status of the talks and which other investors may be involved wasn't clear and Mr. Icahn may sell nothing in the end. 

The fact that he even entertained selling his shares, by far the biggest single stake in Herbalife -- and that Mr. Ackman could be a buyer -- adds more drama to a tug of war over a once-obscure nutritional-products company that Mr. Ackman says is a pyramid scheme, an allegation it denies. The latest development is especially surprising given that just a month ago Mr. Icahn expressed renewed confidence in Herbalife, which in settling a closely watched Federal Trade Commission probe announced he was allowed to boost his stake to just below 35%. 

Mr. Ackman kicked off the fight in 2012 with a widely watched presentation and a $1 billion bet that the stock would collapse. Mr. Icahn joined the battle a few months later and soon after got several Herbalife board seats. Since then, the men have screamed at each other on live television and they and the company have traded legal accusations amid multiple investigations and a feature-length documentary that premiered at the Tribeca Film Festival. 

Herbalife has fought back just as fiercely against Mr. Ackman. The Los Angeles company has maintained throughout that it doesn't break the law and accused Mr. Ackman of market manipulation. The stock price has gone decidedly in the company's and Mr. Icahn's favor, rising roughly 70% since he first disclosed his bet on the shares in February 2013. Its shares closed Thursday at $61.93, nearly double Mr. Ackman's breakeven price in the low-$30s range. Herbalife has a market value of about $5.6 billion. 

Last month, the company settled with the FTC, paying $200 million and agreeing to make changes to its business. Mr. Icahn and Mr. Ackman both claimed victory. Mr. Ackman said the business changes would lead to a collapse of the company. 

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Mr. Icahn countered that the settlement proves Herbalife isn't a pyramid scheme and said the company would thrive. 

"The cloud over Herbalife is gone," Mr. Icahn said then. It isn't clear why he may be willing to sell now. 

Mr. Icahn has been selling several stocks this year amid his wariness of the overall market, even ones in which he has expressed confidence. In April, for instance, Mr. Icahn exited Apple Inc., which had been his biggest investment and whose shares he often predicted would rise dramatically. At the time, he said he continued to support the company's management and believed it would flourish, but he had made a large profit. 

Mr. Icahn often works with Jefferies on such deals, including the exit of a block of shares in Hain Celestial Group Inc. in 2013. 

That Mr. Ackman would consider buying, however briefly, into a company he has waged a crusade against is less surprising than it might seem. He had only signaled willingness to buy a small portion of the stake, one person said. He has long blamed Mr. Icahn for boosting the stock, saying it's something he hadn't bargained for when he plotted the campaign. 

"I would love to find a way to get Carl out of the stock," Mr. Ackman said at CNBC's Delivering Alpha conference in July 2014. 

He has promised to take his quest to shut down Herbalife "to the ends of the earth." 

Rumors about Mr. Icahn possibly selling have periodically helped push the much-rumored shares down, including earlier this week. 

Wall Street has often appeared more captivated by the thrill of watching two giants of investing go toe-to-toe than by the underlying issue of what qualifies as a pyramid scheme or a legitimate business. 

Herbalife sells products including nutritional shakes and meal-replacement bars through a network of distributors who can also sign up new recruits and get paid based on a portion of what they bring in. The debate over the company turns on whether or not Herbalife's business model allows legitimate entrepreneurs to sell its products. In the first quarter, the company reported a profit of $96 million on sales of $1.12 billion. 

Mr. Ackman contends it is all a scheme that allows a group of individuals to prey on unsuspecting newcomers whose own purchases create incentive payments up the chain but have little hope of finding buyers for the goods. 

Mr. Ackman has made several multiple-hour presentations that have gone into excruciating detail on his arguments, which touch on Herbalife's "nutrition clubs" and its business in China. He billed one presentation as a "death blow" only to see the stock soar as he pitched his arguments. 

Other big names in investing took the other side of the bet from Mr. Ackman, a common occurrence in the highly competitive world of Wall Street. 

In early 2013, the fight took on a different proportion. Messrs. Icahn and Ackman both wound up on the phone with CNBC at the same time. Mr. Icahn called Mr. Ackman a "crybaby in the schoolyard." Mr. Ackman retorted that Mr. Icahn was "not an honest man." 

The two men ended their feud the following year, when Mr. Ackman called Mr. Icahn to make peace. They hugged on stage at the CNBC conference and Mr. Ackman hinted that he would be interested in buying Mr.Icahn's stake in Herbalife. 

"It's blessed to forgive," Mr. Icahn said he had told Mr. Ackman. 

Write to David Benoit at david.benoit@wsj.com