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UPDATE 3-Herbalife gives Icahn more seats, small NU Skin fine lifts stock

(Updates shares, adds Icahn comment from CNBC and background)

March 24 (Reuters) - Nutrition and weight-loss company Herbalife Ltd said it had agreed to give three more seats on its board to billionaire investor Carl Icahn, who has supported the company as short-sellers attacked its business practices.

Herbalife shares, which were up 6.8 percent in early afternoon trading, also got a boost from news that rival direct-seller NU Skin Enterprises Inc had been fined just $540,000 by Chinese regulators for illegal sales practices.

NU Skin's shares were up 18.6 percent.

Herbalife shares had lost more than a third of their value since NU Skin said in January that Chinese authorities had launched probes into its business.

Herbalife has since said its own practices are being investigated by the U.S. Federal Trade Commission.

Short-sellers and other critics have accused companies such as Herbalife, NU Skin and USANA Health Sciences Inc of running pyramid-type schemes, questioning their sales model under which distributors make money not only from their own sales but from people they recruit as distributors.

Icahn, Herbalife's biggest shareholder with a 16.8 percent stake, told CNBC on Monday the value of his stake in Herbalife has increased by about $300 million since he bought into the stock.

Pitted against him is the company's most prominent critic, fellow billionaire Bill Ackman, who had taken a short position of about $1.16 billion on Herbalife shares.

Ackman, who heads Pershing Square Capital Management, described Herbalife as his fund's biggest-ever loser as recently as February, but his losses have shrunk dramatically recently as Herbalife's shares have stumbled.

The investor renewed his attack on Herbalife earlier this month when he said he had evidence the company was breaking direct-selling laws in China, its fastest-growing market.

Herbalife has said it has tweaked its business model in China to meet local regulations. "These (changes) include company operated retail stores and certification procedures for sales personnel," the company said in its annual report.

"RESOLUTE IN OUR COMMITMENT"

With the addition of three directors, Icahn will have five seats on the 13-member Herbalife board.

As part of a revision to an agreement struck in February last year, Icahn Enterprises employees Hunter Gary and Jesse Lynn, along with James Nelson, an independent director of Icahn Enterprises, would be put up for election to the board.

Gary is a senior vice president of Icahn Enterprises, while Lynn is assistant general counsel. Nelson has been on the Icahn board since June 2001.

Herbalife had postponed its annual shareholders meeting to April 29 from April 24 while it talked with Icahn about an increase in board representation.

Icahn nominees Jonathan Christodoro and Keith Cozza have been on the Herbalife board for about a year.

"We remain resolute in our commitment to the long term success of Herbalife," Icahn said in a statement.

A spokesman for Pershing Square declined to comment on Monday's announcement.

Icahn will continues to have the right to buy up to 25 percent of Herbalife, Herbalife said.

The Los Angeles-based company said Carole Black, Michael Levitt and Colombe Nicholas would step down from the board, making way for Icahn's nominees.

At 1.15 p.m. ET, Herbalife shares were trading $52.90, while NU Skin shares were at $88.93. USANA shares were up 9 percent at $72.66.

(Additional reporting by Mridhula Raghavan in Bangalore and Svea Herbst-Bayliss in Boston; Editing by Savio D'Souza and Ted Kerr)