By Jessica DiNapoli and Svea Herbst-Bayliss

NEW YORK/BOSTON (Reuters) – U.S. healthcare plan and pharmacy benefits manager Magellan Health Inc is nearing an agreement with Starboard Value LP to expand the size of its board by several seats, including a representative from the activist hedge fund, three sources familiar with the matter said on Thursday.

Magellan did not respond to a request for comment. Starboard declined to comment.

Starboard, which owns 9.9 percent of the company, said in February that it wanted to put six directors on the board and sent a letter to shareholders arguing that management should be looking at a number of options, including a sale.

The hedge fund said that although the company operates in an industry that is poised for growth, it has underperformed because of operational missteps and poor capital allocation.

Reuters reported that Magellan, which has a market capitalization of about $1.6 billion, would explore a sale after facing pressure from Starboard.

Starboard nominated two employees, including Peter Feld and Gavin Molinelli, as director candidates as well as four independent director candidates with expertise in corporate turnarounds and life sciences.

Starboard has been stepping up its healthcare campaigns lately. Earlier this year, Starboard said it is opposing Bristol-Myers Squibb Co’s plan to buy biotech company Celgene Corp. The hedge fund also nominated directors at Bristol.

Previously it has had mixed success in healthcare including its efforts at Perrigo Company Plc and Assertio Therapeutics Inc.

Over the last 52 weeks, Magellan’s share price has fallen 38.7 percent but it is up 14.75 percent since January, when Starboard began to make noise about getting involved.

(Reporting by Jessica DiNapoli and Svea Herbst-Bayliss; editing by Grant McCool and Tom Brown)