Icahn to run board slate for Yahoo: sources

NEW YORK Wed May 14, 2008 8:14pm EDT

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007. REUTERS/Chip East

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, June 27, 2007.

Credit: Reuters/Chip East

NEW YORK (Reuters) - Billionaire investor Carl Icahn is moving ahead with plans to run a dissident board slate at Yahoo Inc (YHOO.O) in a bid to force the Internet company to sell itself Microsoft Corp, sources familiar with the matter told Reuters on Wednesday.

Icahn, who has amassed a large stake in the Internet company over the last week, has lined up at least 12 potential board candidates and could announce the slate as early as Wednesday night, the sources said. The deadline for nominating a dissident slate is Thursday for the July 3 annual meeting.

Frank Biondi, a veteran media executive and former head of Viacom Inc VIAb.N who has worked with Icahn on activist campaigns at Time Warner Inc (TWX.N) and Motorola Inc MOT.N, has agreed to be a nominee, sources said.

Big Yahoo investors have publicly chastised the company for failing to seal a buyout deal with Microsoft (MSFT.O), which abruptly ended talks earlier this month after balking at Yahoo's $37 per share asking price.

Microsoft, which offered a sweetened bid of $33 per share, or $47.5 billion, has given no indication that it would revive the talks, whether or not a new slate is elected, posing a significant risk to Icahn's plans.

Since Microsoft dropped its offer, Microsoft executives have reaffirmed publicly they are no longer interested in pursuing Yahoo. On Wednesday, Microsoft declined comment.

Ryan Jacob, portfolio manager of the Jacob Internet Fund, which holds around 150,000 Yahoo shares, said Icahn will probably prevail in his effort to win board seats.

"There's a reasonable chance that Icahn can be successful," said Jacob. "There's a lot of shareholder unhappiness right now, including ours. It's encouraging because there's the chance that they can be more successful in consummating a transaction with Microsoft."

It was unclear if Icahn plans to run a full slate of ten new directors at Yahoo, or a "short slate," or non-control position. The details have yet to be worked out, sources said.

In previous proxy battles, Icahn has nominated a large slate and settled for a smaller slate after negotiations with the company. In a battle with Motorola Inc MOT.N this year, Icahn put forth a slate with four nominees, but ultimately settled with the company for two board seats.

Icahn reached out to virtually all the candidates on a Microsoft-sponsored board slate that the software company withdrew this month, sources said.

The candidates included Ross Levinsohn, the former head of News Corp's NWSa.N Fox Interactive Media Group and now partner in buyout firm Velocity Interactive Group, sources said.

One industry expert said Icahn would likely have a better chance with a minority board slate, since it is unlikely that investors would allow a complete takeover of the board and the attendant uncertainty that such a move would have at Yahoo.

"It's handing the company over to an entirely different team," said Bruce Goldfarb, partner in Okapi Partners, a proxy advisory firm. "While a dissident slate would obviously have a mandate to sell the company, investors just don't give up control without a premium. If Microsoft was on board, he'd have a chance."

The move on Yahoo is the latest of a number of proxy battles that Icahn, whose net worth is estimated at $14.5 billion, has recently waged. Last month, there was the settlement with Motorola and earlier this month, he nominated three candidates to the board of biotech company Biogen Idec Inc (BIIB.O).

Hedge fund managers had mixed views about the Icahn move.

"You can't lose," said one manager at a multibillion-dollar activist hedge fund approvingly. "The only thing you don't know: if you deliver the company to (Microsoft CEO Steve) Ballmer, does he take the deal?"

Another had less-than-kind words about Icahn. "Don't mix good governance with Carl Icahn. This is not about governance. It's about a quick buck."

Representatives of Yahoo also declined to comment.

(Additional reporting by Robert MacMillan, Michelle Gershberg in New York; Dai Wakabayashi in Seattle; Eric Auchard in San Francisco; and Murali Anantharaman in Boston; Editing by Gary Hill)

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