UPDATE 3-Herbalife gives Icahn board seats, right to boost stake
* Herbalife increases board size to 11 from 9
* New members to be chosen by Icahn
* Icahn has right to increase ownership stake to 25 pct
* Herbalife shares up nearly 7 pct (Adds analyst comments, byline)
Feb 28 (Reuters) - Herbalife Ltd said it plans to add two directors to its board picked by activist investor Carl Icahn, who has supported the nutritional products company in its fight against hedge fund manager William Ackman.
Under terms of the agreement announced on Thursday, Icahn also has the right to increase his stake in Herbalife to 25 percent from nearly 14 percent now.
Herbalife shares jumped 7.5 percent in afternoon trade, as the news raised "hopes that Herbalife will recapitalize, accelerate stock repurchase and/or look to be acquired," said S&P Capital IQ analyst Tom Graves.
At the very least, Icahn, one of the world's best-known investors, will soon have access to non-public information about Herbalife which may bolster his side of the public debate with Ackman over the legitimacy of the multi-level marketer's business model.
"He has a board level opportunity to get some questions answered. That's worth something," said D.A. Davidson analyst Timothy Ramey.
Ackman's Pershing Square Capital Management bet roughly $1 billion that Herbalife is an unsustainable pyramid scheme destined to collapse. Icahn contends that it is a good company with good management.
Icahn's directors expand the size of Herbalife's board to 11 members.
Herbalife Chief Executive Michael Johnson said in a statement that the company looks forward to working with them.
"We appreciate the Icahn parties' shared views on the inherent value of Herbalife's operations, products and future prospects," Johnson said.
Icahn said in the statement that he expects the representatives to provide "positive input into board decisions affecting the future of the company." He did not say who the representatives might be or in what strategic direction he would like to see the company move.
He was not immediately available to comment. Ackman was also not immediately available.
Herbalife shares jumped $2.85, or 7.6 percent, to $40.29 on the New York Stock Exchange. (Reporting by Martinne Geller in New York and Svea Herbst in Boston; Editing by Jeffrey Benkoe, Gerald E. McCormick, Andre Grenon and Eric Walsh)