Icahn takes aim at Yahoo board

15-05-2008

by Billy MacInnes

Billionaire investor Carl Icahn has launched a proxy battle to unseat the Yahoo board and restart talks with Microsoft over a possible sale of the business.

His actions follow the collapse of the original Microsoft takeover bid for Yahoo on 3 May, when the software giant walked away from the negotiations after it balked at Yahoo's demand of an increase in the bid offer from USD33 a share to USD37.

In a letter to Yahoo chairman Roy Bostock, Icahn accused the board of having "acted irrationally and lost the faith of shareholders and Microsoft".

He argued it was "quite obvious that Microsoft's bid of USD33 per share is a superior alternative to Yahoo's prospects on a standalone basis".

Icahn claimed it was "unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 percent premium over Yahoo's closing price of USD19.18 on the day before the initial Microsoft offer".

Angling for the support of disgruntled shareholders, he added: "I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the internet."

Confirming he had put together a slate of 10 board members for election at the shareholders AGM on 3 July, Icahn concluded: "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."

Icahn has already purchased close to 59 million Yahoo shares and is seeking clearance from the Federal Trade Commission to buy as much as another USD2.5 billion worth.

While it is too early to say whether Microsoft will be interested in reigniting talks if Icahn's board is approved, he has form in persuading reluctant takeover targets to agree to being bought. As BEA Systems' largest shareholder, he recently helped push the vendor into a merger with Oracle.