Icahn Threatens Yahoo Board Fight After Failed Bid
Icahn said today that he owns the equivalent of 59 million Yahoo shares, and has permission to acquire up to $2.5 billion worth. He created a slate of 10 nominees for board seats, including Mark Cuban and Frank Biondi Jr. All 10 of Yahoo's directors are up for re-election at the annual meeting on July 3.
Icahn has led proxy fights at companies such as Motorola Inc. and drugmaker ImClone Systems Inc., frequently pushing them to sell part or all of their businesses to help revive sagging share prices. Today he urged Yahoo to make a deal with Microsoft, saying the combination "is by far the most sensible path" if they want to take on Google Inc.
"The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," Icahn, 72, said in a letter to Yahoo's board. "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."
Yahoo, based in Sunnyvale, California, climbed 39 cents, or 1.4 percent, to $27.53 at 10:11 a.m. New York time in Nasdaq Stock Market trading. The stock had fallen 32 percent in the year before Microsoft's bid. Microsoft, the world's biggest software maker, gained 3 cents to $29.96.
Yahoo Chief Executive Officer Jerry Yang rejected Microsoft's $33-a-share offer this month, saying his company was worth at least $4 more. Buying Yahoo would have helped Microsoft compete with Google in Internet searches and online advertising, a market the company expects to almost double to about $80 billion by 2010.
Google, based in Mountain View, California, handled almost two-thirds of U.S. search queries in March. That compared with 21.3 percent for Yahoo and less than 10 percent for Microsoft, according to ComScore Inc., a market researcher in Reston, Virginia.
Accepting Microsoft's offer is a better option than going it alone, Icahn said in the letter. The board "completely botched" negotiations with Microsoft, prompting its shareholders to ask Icahn to step in, he said.
Icahn is acting as a "surrogate" for Microsoft by waging a battle for board seats that may convince Yahoo to sell to the software maker, Troy Mastin, an analyst at William Blair & Co. in Chicago, said in an interview with Bloomberg Television.
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"I think he's playing his cards pretty smart here," said Mastin, who expects Yahoo shares to perform in line with the broader market. "I wouldn't be surprised to see Microsoft and Yahoo together in the next few months."
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