As if today's collapse in JCP's stock price, Bill Ackman had his nose bloodied both figuratively and numerically when his now arch-nemesis appeared on Bloomberg TV [3] to explain his gaining two seats on the board and option to purchase 25% of Herbalife. While obviously not full of the to-and-fro fireworks of their recent encounter, Icahn had quite a few jabs at Ackman record lately, "he has made a few very big mistakes," and thanked him for his big mistake in "giving us an opportunity to buy a company at a discounted price." The interview was full of Icahn's normal bluster but he once again brought up the fact that this whole 300-page dog-and-pony show was undertaken right before year-end, "I do not understand why someone... talks about the fact that he is short," for obvious reasons, "except to say that it certainly helped his year-end numbers."
Icahn on the news that he can purchase up to 25% of Herbalife and nominate two people to its board:
"Yes, that is correct. We are excited. As we have said, this is not one where we do not like management. We do like management quite a bit. Here you have a company that is growing at 10% a year, I believe. Frankly, I do not understand the criticism that Ackman makes about it. We have done a lot of work on it. We have looked through what he says. Even when it comes to lawyers, he claims that Sullivan & Cromwell has agreed that it was a pyramid scheme, but I do not believe that a firm of that stature would ever have said that. He has no evidence concerning that. Our attorneys say they have looked at it and they doubt very much any large legal firm would say that. We think Sullivan & Cromwell is a fine firm, but they are not specialists in the area of the FTC which deals with the Bureau of Consumer Protection. We have done a hell of a lot work on this and we're excited by it. Again, we are looking forward to going on the board and working with the company. We're very supportive of them."
On what Herbalife needs to do to convince Wall Street that it is a sustainable business model:
"I don't know why you have to convince shorts. They, so to speak, made their bed. The shorts do not own the stock. That is why it is ironic that Akman puts out a questionnaire they have to answer. Why should they have to answer a questionnaire to people that don't own the company? In fact, they disown the company. What does it convince mean?...Frankly, I would like to buy more stock. I like the company, but it is not my job to try to convince anybody."
On who he'll put on Herbalife's board:
"We have two candidates from Icahn and Company. Two of my top people will be going on."
On what their goals will be:
"We do not like to micromanage. Basically, what a good board member should do is make sure the numbers are coming in properly. That there are no big problems. The problem in America is in too many companies, the boards do not understand their duties, with many exceptions. I do not think it is the duty of the board to tell anyone how to run the company. They have to make sure they're doing better than their peer group, that their numbers are coming in. That is what we do when we go on boards, and it has been very successful as you can see by our record. We really do not see the problems that Ackman brings up."
On whether he will go all the way to 25%:
"We do not discuss our investment plans. We bargain for that right in talking to the company and they were very good to talk to. I think we have a good rapport with them. We like them. They are putting on two seats and we have the right to go up 10% more, which obviously I bargained for so I am interested. I do not know if I will run in and buy them at this price, but we certainly are interested in doing that."
On whether he believes Ackman made a huge mistake on Herbalife:
"Well, if you look at his record lately, he has made a few very big mistakes. I am not going to say just this one. I am not here to question Ackman. I do not want to get pulled into that again…I look at it as a great opportunity. Ironically, I thank him for giving it to me. Does not mean I like him."
On Ackman's allegations against Herbalife:
"We look at what a pyramid scheme is and obviously we do a lot of research before we take big positions. You know, I do not even want to dignify what he says. I read his report and do not understand what he is saying. He obviously thinks -- I mean, he does not like the brand or something like that and that is fine. I tell you, I do not comprehend why somebody, if you go short, why you have to put out a 300 page report unless you're just trying to trash the stock. I do not understand what he did and why he is trashing it. I have gone short on companies, but I never talk about it. I try to keep it quiet. I get mad if anybody talks about the fact that I am short for obvious reasons. I will not even dignify what he does except to say that it certainly helped his year-end numbers. But I am not accusing him of that. You're asking me what could be a possible reason, but I do not know if that is the reason."
On whether it's artificial manipulation:
"I will not say that. That is up to the SEC. And I am not saying that, I want to be clear. I am just speculating. I have not talked to Ackman for years and I do not intend to talk to him. I am not speculating. Well, I am speculating, but I have no real idea of why he has done it nor do I care that much."
On Ackman saying he'll donate all of his proceeds to charity:
"Well, that is assuming he end up with any proceeds. But the risk is his limited shareholders, not him. His partners. When he says he is not donating, he is not donating his incentive fees, I guess is what he means. I do not quite know what he means. I do not care…As I told you, I do not respect him. I do not like him. That is as far as I will go."
"Honestly, I think that Ackman has given us an opportunity to buy a company at a discounted price. I think that this company, before Ackman really got into it, was trading at what, $45, $47, and it got all the way down to the high $20s. I think it gave us a great opportunity to buy it. For that, I thank him. As far as that goes, that is as far as I want to go into that situation. I bought it because I really do think that it is in a secular change. I think they're in 87 countries, and I think this is an opportunity for unemployed people in these countries to make money and it is a way to distribute it. I think the product is a good product."
On Ackman's accusation that Herbalife distributors aren't really distributing:
"But if you look said it, perhaps the distributor is not the right name for a lot of them. You know, you say you are a distributor because you get a discount. You take the product, you use it. A lot of people do drink this. They believe in it. They have these meetings. It is like -- I do not know what you call it, but they have group meetings. I think distributor maybe should not be the name for a lot of them because they're not in it to make a fee. The others are called distributors because they get a discount. It is a name. I do not understand that argument."
On whether distributors should be called something else, like preferred customers:
"That is right. I mean, that is a good point. It is like you belong to the Costco club and you get a discount, something like that."