Icahn may enter Yahoo fray

Billionaire seen weighing bid to unseat directors

May 14, 2008|By Jessica Guynn and Joseph Menn | Jessica Guynn and Joseph Menn,LOS ANGELES TIMES

SAN FRANCISCO - Billionaire investor Carl C. Icahn is weighing whether to use the stake he has amassed in Yahoo Inc. to launch a proxy fight to unseat some of the Internet pioneer's board members after Microsoft Corp.'s failed bid for the company, two people familiar with the matter said yesterday.

Icahn has purchased about 50 million Yahoo shares, roughly 4 percent of the company, since Microsoft pulled its $47.5 billion offer for Yahoo, according to the people, who spoke on condition of anonymity because the talks were confidential. They said Icahn would decide today whether to nominate a partial slate of candidates to take seats on Yahoo's 10-person board.

Tomorrow is the deadline to nominate a slate of candidates for a shareholder vote at Yahoo's annual meeting, scheduled for July 3.

Icahn's chances of success might hinge on whether Microsoft would agree to return to the negotiating table. The software company, based in Redmond, Wash., withdrew its unsolicited offer May 3 after the companies failed to agree on an acquisition price.

It was unclear yesterday whether Microsoft would agree to do so. "They are playing it very close to the vest," said one person familiar with the situation.

Jana Partners, which has worked in tandem with Icahn in past proxy fights, is considering whether to join Icahn, one person said.

Icahn, Jana, Yahoo and Microsoft declined to comment.

Separately, other activist investors are eyeing Yahoo, including Scott Galloway, founder of Firebrand Partners, which recently gained a New York Times Co. board seat through an activist campaign. Galloway declined to comment.

Yahoo shares rose $1.30, more than 5 percent, to $26.56 after CNBC reported that Icahn might become involved at the urging of Yahoo shareholders.

Public frustration

Major shareholders have taken the unusual step of publicly expressing their frustration with Yahoo management, in particular its chief executive, Jerry Yang, who has resisted selling the company he created. Yang and co-founder David Filo together own about 10 percent of Yahoo.

Dissent from major shareholders encouraged Icahn to consider a proxy fight, according to people familiar with the matter. Icahn in recent years has launched shareholder campaigns against companies including Time Warner Inc., Blockbuster Inc. and BEA Systems Inc. He helped bring Oracle Corp. back to the bargaining table after it had walked away from its offer for BEA, which eventually agreed to a takeover.

"He used to be seen as an interloper, as a short-term investor who didn't share the perspective of long-term shareholders. He needed to spend time convincing vanilla, long-only shareholders," said Chris Young, head of mergers and acquisitions research at RiskMetrics Group, a proxy voting advisory firm. "There is a lot less convincing to do here. Between activists purchasing shares over the last week and longer-term shareholders being unhappy, he can probably have a significant bloc of support for a dissident slate."

Dissident action

Dissident investor Eric Jackson, who had been working to nominate candidates for Yahoo's board, said yesterday that he had raised interest but not enough money to back the effort. Instead, he plans to urge shareholders to withhold their votes from Yahoo's board at the annual meeting.

Jessica Guynn and Joseph Menn write for the Los Angeles Times.

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